State Of Washington v. LA Investors, LLC

Filed
Washington State
Court of Appeals
Division Two
February 13, 2018
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
STATE OF WASHINGTON, No. 48970-8-II
Respondent,
v.
LA INVESTORS, LLC d/b/a LOCAL PUBLISHED OPINION
RECORDS OFFICE and ROBERTO
ROMERO, a/k/a JUAN ROBERTO ROMERO
ASCENCION, individually and as a member
and manager of LA INVESTORS, LLC, and on
behalf of the marital community comprised of
Roberto Romero and Laura Romero; and
LAURA ROMERO, individually and as a
member and manager of LA INVESTORS,
LLC, and on behalf of the marital community
comprised of Roberto Romero and Laura
Romero,
Appellants.
MELNICK, J. — LA Investors, LLC, d/b/a Local Records Office (LRO), appeals from the
trial court’s order granting partial summary judgment to the Washington State Attorney General’s
Office (State), and denying LRO’s cross-motion for partial summary judgment.
We conclude that the trial court properly analyzed whether LRO’s mailer had a capacity to
deceive a substantial portion of the public as a matter of law and that the trial court properly granted
the State summary judgment. We also conclude that the trial court did not err by imposing civil
penalties against LRO for each mailer sent to consumers. We affirm.
48970-8-II
FACTS
LRO is a California based company that solicits business in a number of jurisdictions,
including Washington. LRO engages in the sale of goods and services, including marketing and
selling copies of real property deeds. It is registered as a foreign limited liability company in
Washington and has a mailbox at a United Parcel Service store in Olympia. Roberto Romero and
his wife, Laura Romero, own, manage, and operate LRO.
I. THE MAILERS
In 2012, LRO began sending mailers to Washington consumers who had either recently
purchased or refinanced a home. LRO also sent similar mailers to consumers in other states. In
its mailer, LRO offered its product, a copy of the consumer’s property deed, “the only document
that identifies [you] as the property owner of [your home] by a recently recorded transferred title
on the property” and a “property profile” that provided the “property address, owner’s name,
comparable values, and legal description or parcel identification number, property history,
neighborhood demographics, public and private schools report.” Clerk’s Papers (CP0 at 24. LRO
charged $89 for its product. A copy of the mailer envelope follows.
2
48970-8-II
CP at 22.
The envelope contained LRO’s two page mailer. It had no graphics or logos, only text.1
The first page listed LRO’s Olympia address at the top of the page and, underneath, the consumer’s
name, address, and a barcode.
A copy of the first page follows.
1
Later versions of the mailer contained small icons identifying payment options.
3
48970-8-II
CP at 24.
Underneath the disclaimer was a detachable coupon. The coupon included a “PROPERTY
ID NO.,” a reference to the $89 “SERVICE FEE,” a “PLEASE RESPOND BY” date, and
“CHECK NO.” CP at 24.
The second page of the mailer contained a list of largely irrelevant legal definitions related
to real property and property ownership. Near the bottom of the page, a fourth disclaimer read in
the same type:
DISCLAIMER: * Local Records Office is not affiliated with any State or the United
States or the County Records. Local Records Office is an analysis and retrieval
firm that uses multiple resources that provide supporting values, deeds, and
evidence that is used to execute a property reports [sic] and deliver a requested
deed.
Local Records Office is not affiliated with the county in which your deed is filed
in, nor affiliated with any government agencies. This offer serves as a soliciting
for services and not to be interpreted as bill due.
CP at 25.
LRO tracked the total number of mailings, complaints, stop payment requests, and refund
requests it received, but did not track information as to customer satisfaction with its product.
Between June 2012 and February 2016, LRO mailed 256,998 solicitations to Washington
consumers. Nine thousand six hundred ninety-five Washington consumers purchased LRO’s
product, a 3.9 percent response rate.
During this time, the State received numerous complaints regarding LRO’s solicitations.
Numerous government offices, media outlets, and consumer watchdog agencies nationwide
disseminated consumer alerts regarding LRO’s mailer, many of which characterized the mailer as
a scam.
4
48970-8-II
II. THE LAWSUIT
In November 2013, the State filed a lawsuit against LRO and the Romeros, alleging a
violation of the Consumer Protection Act (CPA).2 Two years later, the State moved for summary
judgment. It argued that LRO’s mailer was a deceptive act that created a net impression that it
was from a government agency or was a bill consumers had to pay. The State further argued that
no material issues of fact were in dispute, and that the only disputed issue involved a question of
law. The issue was whether LRO’s mailer was unfair or deceptive. The State requested that LRO
be enjoined from their allegedly deceptive practices and moved for restitution, civil penalties, and
attorney fees and costs.
LRO filed a cross-motion for partial summary judgment. It argued that, as a matter of law,
LRO’s mailer was not a bill and was not deceptive in that regard; neither LRO’s envelope nor
mailer as a whole resembled a mailing from a government agency or title company; and, that the
disclaimers LRO used were sufficient to counter any net impression that the mailer was a bill or
from a government agency or title company.
The State supported its motion with 25 declarations from Washington consumers who
received LRO’s mailer. Some consumers stated that the timing of the mailer coupled with the
“official looking” envelope and the Olympia address made it seem like it demanded attention and
came from a government organization. CP at 625. Some stated that, upon receiving the mailer,
they believed there was a problem with their property transaction. Others believed the mailer
either came from a government agency or was a bill. Some believed that the sender would penalize
them for failing to pay $89. Consumers also stated that the “respond by” date created a sense of
urgency to comply. Even after reading the mailer and its disclaimers in full, some believed the
2
Ch. 19.86 RCW.
5
48970-8-II
mailer was suspicious, and that LRO was attempting to mislead or deceive homeowners. Others
declared that only after paying and receiving a “very unofficial looking property profile” from
LRO did they realize they were “scammed” and they asked for a refund. CP at 635, 638, 649.
The State also submitted evidence that deeds were typically one to two pages in length,
and that, by law, the Auditor’s Office charged nominal amounts for certified and non-certified
copies of deeds.3 It also submitted evidence that companies such as HouseFax.com offered
detailed property profile reports for free and charged $19 thereafter for additional reports.
Additionally, the State submitted evidence of enforcement actions or settlements multiple
other states entered into with LRO regarding the same or similar deceptive conduct. It also
submitted evidence that in 2011, Romero voluntarily surrendered his California real estate license
to settle an action by the California Department of Real Estate which alleged “misrepresentations”
and “fraud and/or dishonest dealing[s]” with consumers. CP at 415.
Both parties supported their motions with their respective experts’ reports and deposition
testimony. The State retained Dr. Anthony Pratkanis, a psychology professor at the University of
California, Santa Cruz. Pratkanis taught courses in social psychology, research methods,
consumer psychology, marketing management, and buyer behavior. His primary area of research
and study involved social influence and belief formation, including deceptive advertising and sales
practices. He published numerous books and articles on these topics.
Pratkanis reviewed the consumer declarations and complaints, consumer alerts from
various government authorities, LRO’s mailer, and LRO’s response rate. Citing to studies and
articles, Pratkanis opined that the response rate for LRO’s mailers in Washington was “two to three
3
RCW 36.18.010(2) & (3) (for certified copies, $3.00 for the first page and $1.00 for each page
thereafter; for non-certified copies, $1.00 per page).
6
48970-8-II
times the expected rate of average response for comparable mailers.” CP at 353. He noted that
LRO’s mailer enjoyed a high response rate, even though it failed to use many of the most effective
methods used in direct mail to increase response rates, “such as offering free gifts and free trials,
providing money-saving offers, highlighting testimonials concerning the value of the product, and
featuring prominently money-back guarantees of satisfaction.” CP at 353. As to the significance
of complaint rates, he cited to a number of studies and opined:
In general, consumers do not often complain even when dissatisfied with a
purchase and rarely complain to third parties such as the government. . . . When
confronted with a defective service or product, the two most common responses by
consumers . . . is to (a) do nothing or (b) take private action such as quit purchasing
the product or engage in negative word of mouth of the product.
CP at 370.
Pratkanis opined that LRO engaged in a deceptive sales practice by leading consumers to
believe they received a bill from a government agency or a title company, or that they needed to
have a copy of a deed to prove ownership of their home. In reaching his opinion, Pratkanis used
established theories, his knowledge of influence tactics, and the science of consumer behaviors
and social influence. While he did not conduct an independent survey or focus group, he conducted
a “social influence analysis” by reviewing the mailer and the influence tactics LRO used. CP at
993. In its response to the State’s motion, LRO objected to Pratkanis’s opinion, arguing that it
was “demonstrably unscientific” and “not admissible under ER 702.”4 CP at 1009.
LRO retained Dr. Albert Bruno, a marketing professor at Santa Clara University. Bruno
taught courses in marketing, marketing research, and marketing strategy. Bruno opined that
LRO’s response rate was not necessarily an indication of a deceptive marketing strategy. He
4
The trial court did not explicitly rule on this objection, but seemingly overruled it because it made
clear in its oral ruling and written order that it considered both parties’ experts’ opinions.
7
48970-8-II
further noted that LRO’s complaint rate was “relatively low” and that Pratkanis failed to review
the complaint rate and refund requests. CP at 1048.
Bruno further opined that LRO’s mailer actually did a poor job of engaging potential
consumers. He did not address the composition of LRO’s mailer in his report, but testified during
his deposition that the mailer had a “flat” effect and that it could be “enhanced.” CP at 446. He
opined that LRO’s complaint rate was significantly lower than would generally be expected for
such a mailer.
In response to why some consumers had to go to their escrow officer for further
clarification regarding LRO’s mailer, Bruno stated that “it takes all kinds” and that the government
could not protect against every individual who misinterpreted the mailer. CP at 893. He stated,
“It kind of says a population is made up of very smart people who don’t read, very dumb people
that can’t read, and people that get confused every second of the day by everything.” CP at 893.
Bruno also did not conduct focus groups. He did not review any consumer complaints or consumer
alerts in reaching his opinions.
The trial court partially granted the State’s motion, denied LRO’s motion, and permanently
enjoined LRO from engaging in any other deceptive practices. The court ruled that, as a matter of
law, LRO’s mailer was unfair and deceptive because it had the capacity to deceive a substantial
portion of the public.5 It specified that LRO “created the deceptive net impression” that its mailer
was “from a governmental agency or was a bill that Washington consumers were obligated to
5
LRO sent different versions of its mailer to Washington homeowners. For example, the original
mailer stated homeowners could obtain a copy of their deed “FOR UP TO $89.00.” CP at 10.
After November 2012, LRO omitted this phrase, and later added the language “FOR A NOMINAL
FEE.” CP at 628. In 2014, LRO also removed the language “RESPOND PROMPTLY” from the
mailer’s envelope. CP at 323 n.2. Later versions of the mailer also added small icons identifying
payment options. The trial court applied its ruling to all versions of the mailer.
8
48970-8-II
respond to or pay.” CP at 1182-83. The court also ruled that the State proved all elements of a
CPA violation.
III. CIVIL PENALTIES
At a later hearing, the trial court heard argument on civil penalties. The State argued that
the court should impose a $10 penalty for each of the mailers sent that did not result in a purchase,
and $89 for each of the mailers sent that did result in a purchase. LRO argued that ordering both
restitution and civil penalties was excessive.
Both parties cited to United States v. Reader’s Digest Association, Inc., 662 F.2d 955 (3rd
Cir. 1981), which outlined five factors that a trial court may use to determine the penalty amount.
The trial court stated that it would consider the factors, but it was not bound by them. The court
noted that the maximum penalty allowed by statute would be roughly $23 million.
The trial court imposed a $2,569,980 penalty against LRO. The court reached that amount
by assessing a $10 penalty for each of LRO’s 256,998 solicitations mailed to Washington
consumers between June 2012 and February 2016. In selecting a single penalty amount for all
solicitations, the trial court chose not to distinguish between consumers who accepted LRO’s offer
and those who did not. The court reasoned that regardless of the outcome, “the unfair and
deceptive act . . . happened when the Defendants mailed out the mailer.” RP (Mar. 16, 2016) at
67. The court found that LRO did not submit evidence of its inability to pay any imposed penalties,
and further reasoned:
This civil penalty will eliminate any benefits derived by the Defendants from their
deceptive practices, and also will vindicate the authority of the [CPA] to protect
Washington consumers from unfair and deceptive acts.
....
[T]he Court also finds that Defendants . . . acted in bad faith. The acts and practices
described herein were not isolated instances of misjudgment, but rather, an
9
48970-8-II
intentional and deliberate practice perpetuated between June 2012 and February
2016. Defendants’ violations caused substantial injury to the public and as early as
2013 Defendants were put on notice by Plaintiff that the [LRO] solicitation had the
capacity to deceive. Defendants nevertheless continued to disseminate thousands
of solicitations in Washington.
CP at 1308.
The trial court entered a judgment for the State and ordered LRO to pay restitution and
attorney fees and costs, in addition to civil penalties.
LRO appeals.
ANALYSIS
I. SUMMARY JUDGMENT
LRO argues that the trial court erred by granting the State summary judgment by
concluding, as a matter of law, that its mailer was deceptive and in violation of the CPA because
it had the capacity to deceive a substantial portion of the public. We disagree.
A. STANDARD OF REVIEW
We review rulings on motions for summary judgment de novo, engaging in the same
inquiry as the trial court. Jones v. Allstate Ins. Co., 146 Wash. 2d 291, 300, 45 P.3d 1068 (2002).
Summary judgment is proper if “the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.” CR 56(c).
We construe all facts and their reasonable inferences in the light most favorable to the nonmoving
party. Jones, 146 Wash. 2d at 300.
The party moving for summary judgment bears the burden of demonstrating that there is
no genuine issue of material fact. Atherton Condo. Apt.-Owners Ass’n Bd. of Dirs. v. Blume Dev.
Co., 115 Wash. 2d 506, 516, 799 P.2d 250 (1990). “A material fact is one upon which the outcome
10
48970-8-II
of the litigation depends in whole or in part.” Atherton, 115 Wash. 2d at 516. If the moving party
satisfies its burden, the nonmoving party must present evidence demonstrating that a material fact
remains in dispute. Atherton, 115 Wash. 2d at 516. If the nonmoving party fails to demonstrate that
a material fact remains in dispute, and reasonable persons could reach but one conclusion from all
the evidence, then summary judgment is proper. Vallandigham v. Clover Park Sch. Dist. No. 400,
154 Wash. 2d 16, 26, 109 P.3d 805 (2005).
Because we examine the case de novo, we “not only review[ ] the decision of the trial
court[,] but may also determine whether the trial court’s decision can be affirmed on alternate
grounds.” Smith v. Stockdale, 166 Wash. App. 557, 563, 271 P.3d 917 (2012).
B. THE TRIAL COURT PROPERLY GRANTED THE STATE SUMMARY JUDGMENT
1. THE TRIAL COURT APPLIED THE CORRECT STANDARD
In this case, the only issue is whether LRO committed an unfair or deceptive act in violation
of the CPA because its mailer had the capacity to deceive a substantial portion of the public. LRO
asserts this issue presents a question of fact. We disagree, and conclude that the trial court properly
analyzed the issue as a question of law.6
The CPA prohibits “[u]nfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce.” RCW 19.86.020. “Where, as here, the
Attorney General brings a CPA enforcement action on behalf of the State, it must prove (1) an
unfair or deceptive act or practice[,] (2) occurring in trade or commerce, and (3) public interest
impact.” State v. Kaiser, 161 Wash. App. 705, 719, 254 P.3d 850 (2011).
6
The State argues that LRO did not preserve the issue below. We disagree with the State and
address whether LRO’s mailer was unfair or deceptive on the merits.
11
48970-8-II
This case focuses on the CPA’s element that LRO’s act or practice was unfair or deceptive.
An act is unfair or deceptive if it “had the capacity to deceive a substantial portion of the public.”
Panag v. Farmers Ins. Co. of Wash., 166 Wash. 2d 27, 47, 204 P.3d 885 (2009). Thus, the CPA only
requires the State to show capacity to deceive. Panag, 166 Wash. 2d at 47. The State is not required
to prove causation, injury, intent to deceive or actual deception. Kaiser, 161 Wash. App. at 719.
Whether an act is unfair or deceptive under the CPA is a question of law. State v.
Mandatory Poster Agency, Inc., 199 Wash. App. 506, 520-22, 398 P.3d 1271, review denied, 189
Wash. 2d 1021 (2017). Mandatory Poster held that whether an undisputed act had the capacity to
deceive a substantial portion of the public is a question of law. 199 Wash. App. at 519-20.
The Washington pattern jury instruction, “Definition—Unfair or Deceptive Act or
Practice”, is consistent with this interpretation. 6A WASHINGTON PRACTICE: WASHINGTON
PATTERN JURY INSTRUCTIONS (WPI): CIVIL 310.08, at 43 (6th ed. Supp. 2013). The comments to
the instruction state, “Whether an alleged act constitutes an unfair or deceptive act or practice
covered by the CPA is a question of law that appellate courts review under the de novo standard .
. . It is a question of fact whether the defendant committed a specific action or practice.” WPI
310.08, cmt. at 43.
LRO, citing federal decisions, argues that capacity to deceive is a question of fact. See
Giant Food, Inc. v. Fed. Trade Comm’n, 322 F.2d 977, 982 n.12 (D.C. Cir. 1963); Carter Prods.
Inc., v. Fed. Trade Comm’n, 268 F.2d 461, 496 (9th Cir. 1959). Washington courts are instructed
to look to appropriate federal court decisions for guidance when addressing issues involving the
CPA. RCW 19.86.920. But federal court decisions are guiding, not binding, authority. Panag,
166 Wash. 2d at 47. And as the State points out, some federal court decisions hold that capacity to
deceive is a question of law. See Fed. Trade Comm’n v. Stefanchik, 559 F.3d 924, 929 (9th Cir.
12
48970-8-II
2009); Consumer Fin. Port. Bur. v. Gordon, 819 F.3d 1179, 1192-93 (9th Cir. 2016)). “In the final
analysis, the interpretation of RCW 19.86.020 is left to the state courts.” State v. Reader’s Digest
Ass’n., 81 Wash. 2d 259, 275, 501 P.2d 290 (1972). We determine the issue is one of law, not fact.
Accordingly, we conclude that the trial court properly analyzed whether LRO’s mailer had
the capacity to deceive a substantial portion of the public as a question of law, and we review de
novo the trial court’s conclusion that LRO’s acts were unfair or deceptive under Washington’s
CPA.
2. LRO’S MAILER HAD THE CAPACITY TO DECEIVE A SUBSTANTIAL PORTION
OF THE PUBLIC
LRO argues that the State failed to establish that LRO’s mailer had the capacity to deceive
a substantial portion of the public that the mailer was from a government agency. It argues that
the State failed to quantify the alleged deception or establish that the mailer would likely deceive
reasonable consumers. LRO’s argument flows from the mistaken premise that capacity to deceive
under the CPA is a question of fact. Again, the trial court properly analyzed the issue as a question
of law. LRO’s arguments therefore misconstrue the CPA and the State’s burden of proof. LRO’s
interpretation that the CPA requires the State to show intent to deceive, or to prove actual deceit,
is incorrect. We reject as irrelevant LRO’s assertion that, as a factual matter, the mailer was not
deceptive. Our sole task is to determine whether, as a matter of law, LRO’s mailer has the capacity
to deceive a substantial portion of the public. We conclude that it does.
i. LRO’S MAILER CONVEYED A NET IMPRESSION THAT IT WAS FROM A
GOVERNMENT AGENCY
The undisputed facts are as follows: LRO sent the mailer in this case to over 200,000
consumers, generating over 9,000 paid responses. There is no question that the mailers reached a
substantial portion of the public. Numerous consumers complained that they believed the mailer
13
48970-8-II
was from a governmental agency or a bill they were required to pay. In their declarations, the
consumers stated that the “respond by” date also created a sense of urgency to comply. Some
consumers, even after reading the mailer and its disclaimers, felt like LRO attempted to mislead
homeowners.
The State need only show that the act or practice of sending LRO’s mailer “had the capacity
to deceive a substantial portion of the public.” Panag, 166 Wash. 2d at 47. The undisputed facts
establish that LRO sent the mailer to Washington consumers. As a matter of law, this act or
practice was deceptive if the mailer contained a representation or omission likely to mislead a
“reasonable” or “ordinary” consumer. Panag, 166 Wash. 2d at 50 (further noting the implicit
understanding that what is misrepresented must be of material importance); Kaiser, 161 Wash. App.
at 719.
A deceptive act or practice is measured by the “‘net impression’” on a reasonable
consumer. Panag, 166 Wash. 2d at 50 (quoting Fed. Trade Comm’n v. Cyberspace.Com LLC, 453
F.3d 1196, 1200 (9th Cir. 2006)). A communication can be accurate and truthful, yet still be
deceptive if the “‘net impression’ it conveys” is deceptive. Panag, 166 Wash. 2d at 50 (quoting
Cyberspace.Com LLC, 453 F.3d at 1200).
The State has met this burden. As the State’s expert testified,7 the mailer in this case
repeatedly featured the official-sounding name of the sender—“Local Records Office”—and
contained the prominent banner reading “County Public Information.” The mailer appeared
7
LRO argues that the State’s expert’s opinions were baseless and inadmissible expert testimony
regarding whether the mailer was deceptive. We disagree. Pratkanis qualified as an expert because
of his education and experience in social psychology, social influence, and consumer psychology.
His opinion regarding the mailer’s capacity to deceive and the net impression it conveyed, from a
consumer’s perspective, was helpful to the trial court in determining whether, as a matter of law,
it had the capacity to deceive. See ER 702.
14
48970-8-II
governmental in its formatting and language. It bore a return address of the same city as the seat
of our state government. The envelope referenced the United States code. After reviewing the
record, we agree that as a matter of law the mailer in this case had the capacity to deceive. Based
on the net impression conveyed by the mailer, an ordinary consumer could reasonably have been
misled to believe it was a government document.
LRO argues that the consumer declarations submitted by the State did not establish the
mailer’s capacity to deceive a substantial portion of the public. It argues that the declarations only
showed that consumers who skimmed through the mailer and assumed it was from a government
agency were not “reasonable” consumers. Br. of Appellant at 26. Again, these arguments
misconstrue the issue at bar as a factual question. It is not. Establishing the speed at which so-
called “reasonable” consumers read their mail is not part of the “unfair or deceptive” legal analysis
under the CPA. Nor is the State required to establish whether consumers were actually deceived.8
This argument is irrelevant and falsely premised on LRO’s argument that we are making a factual
determination.
LRO also argues that the State failed to quantify the alleged deception. Br. of Appellant at
25-26. It argues that over 96 percent of the mailer’s recipients did not respond to the mailer and
that the State received few complaints relative to the number of mailers sent. Br. of Appellant at
25. Again, LRO’s argument misses the point. Even assuming LRO’s factual assertions are
accurate, they are irrelevant to whether the State has met its burden under the CPA. The State is
not required to prove actual deception nor to quantify the exact number of consumers that were
deceived. Kaiser, 161 Wash. App. at 719.
8
Although many of the declarations do demonstrate deception, revealing that many recipients
believed the mailer was from a government agency and that they were required to pay $89.
15
48970-8-II
ii. LRO’S MAILER CONVEYED A NET IMPRESSION THAT IT WAS A BILL
LRO argues that the State failed to establish that LRO’s mailer had the capacity to deceive
a substantial portion of the public that it was a bill. LRO asserts that the State did not adequately
support its assertion that the mailer’s inclusion of personalized information, a reply coupon, and
the phrase “Please Respond By” were “elements . . . common to bills and not solicitations.” Br.
of Appellant at 33.
Once again, LRO’s argument incorrectly frames the issue on appeal as a factual question
of evidentiary sufficiency. As discussed above, whether the mailer had the capacity to deceive is
a question of law. Based on the undisputed facts, we conclude that the net impression the mailer
conveyed had the capacity to deceive.
LRO focuses on a few aspects of the mailer to argue that the State failed to prove that the
mailer looked like a bill. LRO misconstrues the State’s burden. As a matter of law, the State only
needed to show that LRO’s mailer had the capacity to deceive, not that it had “elements common
to bills and not solicitations.” Br. of Appellant at 33. Moreover, LRO’s selective focus on certain
characteristics is inconsistent with established case law. Under the CPA, a deceptive act or practice
is measured by the “‘net impression’” on a reasonable consumer. Panag, 166 Wash. 2d at 50 (quoting
Cyberspace.Com LLC, 453 F.3d at 1200).
The mailer in this case could have been reasonably mistaken for a bill. The State’s expert
opined that the mailer mimicked a bill by including: the recipient’s personalized information; reply
coupon; the frequent presence of the name “Local Records Office”; the banner reading “County
Public Information”; LRO’s Olympia address; a specified but artificial deadline; and the second
page of the mailer which was filled with largely irrelevant, but authoritative language. The expert
also stated that Romero knew consumers were more inclined to respond if he posted a deadline on
16
48970-8-II
the mailer, and opined that $89 for a copy of a deed and property profile was not an accurate
representation for such documents. Citing to studies, the expert further opined that the “Please
Respond” message created a sense of urgency to respond—“rush[ing] the consumer into
compliance,” CP at 356,—and that such deadlines increased the probability of response. He
concluded that, given the mailer’s features, the use of an artificial deadline was a deceptive
strategy.
After reviewing the record, we agree. The particular mailer in this case was deceptive
because it had the capacity to convince reasonable consumers that it was a bill the consumer had
to pay.9
iii. THE DISCLAIMERS DID NOT CURE THE POTENTIAL FOR DECEPTION
Lastly, LRO argues that its “conspicuous” disclaimers countered any of the mailer’s
misleading impressions. Br. of Appellant at 35-38. The State argues that LRO’s disclaimers are
insufficient to cure the mailers’ capacity for deception. Again, we agree with the State.
Washington and federal courts have recognized that disclosures or disclaimers “do not
always cure the potential for deception.” Mandatory Poster, 199 Wash. App. at 523; Panag, 166
Wash. 2d at 50; Cyberspace.Com, 453 F.3d at 1200. Disclaimers are inadequate unless they are
“sufficiently prominent and unambiguous to change the apparent meaning of the claims and to
9
LRO also argues that the response rate to the mailer and the “asserted worthlessness” of LRO’s
product was not a proper basis to find capacity to deceive as a matter of law. Br of Appellant at
34-35. It also argues that the number of complaints or requested refunds did not establish that
LRO’s product and service was worthless or deceptive. But LRO does not show that the response
rate and value of its product provided the basis on which the trial court found a capacity to deceive,
or the basis on which the court found that the mailer conveyed a net impression it was from a
governmental agency or was a bill. Further, the State’s expert’s opinion as to LRO’s “high”
response rate went to the expert’s opinion that LRO’s mailers were effective, not necessarily to
the likelihood of consumer deception as LRO contends.
17
48970-8-II
leave an accurate impression.” Removatron Int’l Corp. v. Fed. Trade. Comm’n, 884 F.2d 1489,
1497 (1st Cir. 1989). “Anything less is only likely to cause confusion by creating contradictory
double meanings.” Removatron, 884 F.2d at 1497.
Here, the disclaimer “THIS IS NOT A GOVERNMENT DOCUMENT” on the mailing
envelope was overshadowed by a boxed and bolded “WARNING” notation regarding mail fraud.
CP at 22. It was also overshadowed by the language “IMPORTANT PROPERTY
INFORMATION” and “RESPOND PROMPTLY” located next to it, near the center of the
envelope. CP at 22.
Other disclosures were embedded in the body of the mailer and not prominently placed.
CP at 24-25. In the top right corner of the mailer, the disclaimer, in all caps but small type, “THIS
SERVICE TO OBTAIN A COPY OF YOUR DEED OR OTHER RECORD OF TITLE IS NOT
ASSOCIATED WITH ANY GOVERNMENTAL AGENCY,” was overshadowed by the boxed
and bolded language, “Please Respond By” and an enlarged and highlighted date. CP at 24.
Another disclaimer appeared near the bottom of the mailer. But that disclaimer was also
overshadowed by the coupon to remit payment located below it, which also took up one-fourth of
document space. Due to its placement and formatting, the disclaimer on the second page of the
mailer read as though it was part of the list of definitions.
Additionally, both experts acknowledged that consumers do not read every word or read
in detail the content of documents. As Pratkanis noted in his report, a more effective way of
correcting misperceptions is to design the mailer in such a way that there is no initial
misperception. He also noted, citing to various studies, that text set in all caps was harder to read
than text in mixed case; thus, a consumer may miss a key word, e.g. “NOT,” which could radically
18
48970-8-II
change the meaning of the text. CP at 360. Considering the format and placements of the various
disclaimers, the disclaimers do not cure the potential for deception.10
Accordingly, we conclude that, as a matter of law, LRO’s mailer was an unfair or deceptive
act that had the capacity to deceive a substantial portion of the public. The trial court properly
granted the State’s motion for summary judgment.11
II. CIVIL PENALTIES
LRO argues that the trial court abused its discretion by imposing a $10 penalty for each of
the mailers that consumers did not respond to—the same penalty it imposed for each mailer that
resulted in a sale. We disagree.
The CPA authorizes civil penalties of up to $2,000 per violation of RCW 19.86.020. RCW
19.86.140. The statute does not limit the possible number of violations to the number of aggrieved
consumers. Each deceptive act is a separate violation. State v. Ralph Williams’ Nw. Chrysler
Plymouth, Inc., 87 Wash. 2d 298, 317, 553 P.2d 423 (1976) (also recognizing the potential for
10
LRO further argues that the First Amendment gives advertisers broad freedom with respect to
the design and contents of their mailers. Appellants’ Opening Br. at 32 (“[A]dvertisers have
significant leeway in content and design and are not required to mimic advertisements the
government considers typical so that consumers will instantly recognize them as advertisements.”).
Advertisers’ freedom to design their own advertisements, however, does not grant them the right
to deceive consumers. See Friedman v. Rogers, 440 U.S. 1, 9, 99 S. Ct. 887, 59 L. Ed. 2d 100
(1979) (First Amendment allows regulation of “false, deceptive, and misleading commercial
speech.”). The trial court’s determination that the mailer in this case was deceptive did not infringe
on LRO’s First Amendment rights.
11
LRO additionally assigns error to the trial court’s denial of its cross-motion for partial summary
judgment because no reasonable trier of fact could conclude that either the text or design of its
mailer had the capacity to deceive a substantial portion of the public that it was a government
document or a bill. Because review is de novo and the only issue in dispute is whether the LRO’s
mailer was unfair or deceptive, our analysis above addresses this issue. We conclude that the trial
court did not err by denying LRO’s cross-motion.
19
48970-8-II
multiple violations per consumer). CPA penalties are valid even if the trial court finds that the
consumers did not rely on the appellant’s wrongful conduct. Ralph Williams’, 87 Wash. 2d at 317.
“We review the trial court’s assessment of civil penalties within the statutory limits [of the
CPA] for an abuse of discretion.” Mandatory Poster, 199 Wash. App. at 525. “An abuse of
discretion occurs when a decision is ‘manifestly unreasonable, or exercised on untenable grounds,
or for untenable reasons.’” Mayer v. Sto Industries, Inc., 156 Wash. 2d 677, 684, 132 P.3d 115 (2006)
(quoting Associated Mortg. Inv’rs v. G.P. Kent Constr. Co., 15 Wash. App. 223, 229, 548 P.2d 558
(1976)).
As they did at the trial court, both parties cite to Reader’s Digest, a federal mass mailing
case under an analogous consumer protection standard. 662 F.2d at 959-60. In that case, the
federal court held that Reader’s Digest committed over 17 million violations, and that each letter
distributed in the mass mailing constituted a separate violation. Reader’s Digest, 662 F.2d at 959-
60. The court identified five factors to consider in determining the appropriate penalty: (1) whether
defendants acted in good faith, (2) injury to the public, (3) defendant’s ability to pay, (4) desire to
eliminate any benefits derived by the defendants from the violation at issue, and (5) necessity of
vindicating the authority of the law enforcement agency. Reader’s Digest, 662 F.2d at 967.
Here, the trial court applied the Reader’s Digest factors to determine civil penalties and
imposed a $10 penalty for each of the 256,998 mailers sent to Washington consumers. Finding
that LRO’s actions were in bad faith and recognizing that there was no evidence of LRO’s inability
to pay, the trial court explained that the civil penalty would “eliminate any benefits derived by
[LRO] from their deceptive practices, and also will vindicate the authority of the [CPA] to protect
Washington consumers from unfair and deceptive acts.” CP at 1308.
20
48970-8-II
LRO argues that an application of the Reader’s Digest factors does not support the
imposition of penalties for mailers that were discarded or did not receive a response. But the
federal Reader’s Digest factors, while helpful, are not mandatory considerations for Washington
courts. Mandatory Poster, 199 Wash. App. at 526. Instead, the amount of civil penalties assessed
under the CPA falls within trial courts’ discretionary authority. See Etheridge v. Hwang, 105 Wn.
App 447, 459, 20 P.3d 958 (2001). In this case, the trial court chose to consider the factors and
explained why it was imposing civil penalties. LRO does not show why or how the trial court’s
determination was “manifestly unreasonable,” and thus fails to demonstrate abuse of discretion.
See Mayer, 156 Wash. 2d at 684.
Because the mailer was deceptive and because each deceptive act was a separate violation,
the trial court’s decision was not manifestly unreasonable, or exercised on untenable grounds, or
for untenable reasons. Mayer, 156 Wash. 2d at 684. Accordingly, we conclude that the trial court
did not abuse its discretion in imposing civil penalties for each of the mailers sent, including those
that did not receive a response.
III. ATTORNEY FEES ON APPEAL
The State requests us to award attorney fees and costs pursuant to RAP 18.1(b). LRO
argues that we should decline to award additional fees and costs due to the large judgment the
State obtained below and because LRO’s appeal raised legitimate issues regarding the trial court’s
decision.
The prevailing party is entitled to attorney fees and costs on appeal if applicable law grants
to a party the right to recover and that party includes such a request in its opening brief. RAP
18.1(a)-(b). Under RCW 19.86.080(1), we have “discretion to award the prevailing party
reasonable attorney fees and costs.” Kaiser, 161 Wash. App. at 726. Because the State is the
21
48970-8-II
prevailing party in this appeal and included its request in its opening brief, we conclude that, in
compliance with RAP 18.1(d), the State is entitled to an award of reasonable attorney fees and
costs.
We affirm.
Melnick, J.
We concur:
Johanson, P.J.
Lee, J.
22