Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_07-cv-00730/USCOURTS-ared-4_07-cv-00730-1/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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IN THE UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

M.S. WHOLESALE PLUMBING, INC.,

individually and on behalf of a class of

all others similarly situated, 

Plaintiff

VS. 

UNIVERSITY SPORTS

PUBLICATIONS CO., INC.

Defendant

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NO: 4:07CV00730 SWW

ORDER

M.S. Wholesale Plumbing, Inc. (“M.S.”) brings this putative class action pursuant to the

Court’s diversity jurisdiction, charging University Sports Publications Co., Inc. (“USP”) with

illegal marketing and selling of advertising space. Before the Court is USP’s motion to dismiss

(docket entry #15), M.S.’s response (docket entry #18), and USP’s reply (docket entry #19). 

Also before the Court is USP’s motion for a protective order (docket entry #24), M.S.’s motion

for sanctions in response to USP’s motion for a protective order (docket entry #28), and USP’s

response thereto (docket entry #30). After careful consideration, and for the reasons that follow,

USP’s motion to dismiss will be denied to the extent that USP seeks dismissal of M.S.’s

individual claims for relief. However, to the extent that USP seeks dismissal of class allegations,

the motion to dismiss will be held in abeyance pending a response from M.S. USP’s motion for

a protective order will be granted as provided in this order, and M.S.’s motion for sanctions will

Case 4:07-cv-00730-SWW Document 33 Filed 01/07/08 Page 1 of 13
be denied without prejudice. 

I. Background

According to complaint allegations, USP purchases advertising space in various college

publications, such as athletic programs and yearbooks, and resells the space to businesses at

inflated prices. M.S. claims that USP focuses its marketing efforts on businesses that depend on

local colleges and universities for income and are reluctant to decline an opportunity to support

such schools. According to M.S., USP secures money for advertisement space from the targeted

businesses by misrepresenting that it is acting on behalf of local schools.

M.S. makes the following allegations regarding its specific dealings with USP. M.S. is a

plumbing supply company in Russellville, Arkansas. Arkansas Tech University (“ATU”), also

located in Russellville, is one of M.S.’s best customers. Prior to the 2004-2005 ATU football

season, M.S. received an “unsolicited” invoice from USP. The invoice bears a banner letterhead

that reads as follows: 

ARKANSAS TECH UNIVERSITY 

OFFICIAL FOOTBALL PROGRAM

Below the letterhead, in considerably smaller print, appears the following:

Prepared By: University Sports Publications,

1818 North Taylor Street

Dept. 196 

Little Rock, AR 72207 

(501) 569-9244

The body of the invoice reads as follows:

Thank you again for your participation in the 2004 Arkansas Tech University

Football Program. If you have not already done so, please remit payment at your

earliest convenience. We look forward to working with you in the future.

SALE AMOUNT: $495.00, NET SIZE: Sixteenth Page AMOUNT DUE: $495.00, Net

Docket entry #1, Ex. A. 

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M.S. returned the invoice unpaid. Subsequently, USP agents contacted M.S. by phone. 

The agents stated that they were calling on behalf of ATU, and they asked M.S. to support ATU

by purchasing an advertisement in the official ATU football program. M.S. declined to purchase

an advertisement. Nonetheless, the 2004-2005 ATU football program included an advertisement

for M.S. 

Desiring to maintain a good business relationship with ATU, and believing that USP was

selling advertising space on behalf of ATU, M.S. paid for the advertisement. M.S. alleges that

USP retained the payment, which was never used for the benefit of ATU. 

Prior to the 2007 football season, USP again contacted M.S. in an attempt to sell

advertisement space in the ATU football program. When M.S. questioned USP about its

relationship with ATU, a USP agent stated that USP “put the football program together” for

ATU. M.S. requested information regarding USP’s pricing, services, and affiliations, but

specifically declined to purchase an advertisement. 

Again, M.S. received an invoice for a sixteenth page advertisement in the ATU football

program. This time, USP charged M.S. $595. The invoice, styled in a letter format, reads:

Thank you for your participation in the 2007 Arkansas Tech Football Program.

While providing a worthwhile service by supporting Arkansas Tech University, you

are also gaining valuable exposure for your company as your ad will be seen by

thousands of students, alumni, faculty members and school administrators. Your ad

will be placed in the section entitled “Contractors Building for the Future of

Arkansas Tech University. Again, thank you for your participation. 

Docket entry #1, Ex. B.

M.S. did not pay the invoice. M.S. contacted ATU and learned that USP’s

representations were false: USP did not “put together” a football program for ATU and did not

act on behalf of ATU. Furthermore, ATU informed M.S. that a full page advertisement could be

Case 4:07-cv-00730-SWW Document 33 Filed 01/07/08 Page 3 of 13
purchased directly from the University for $350. 

M.S. charges USP with violations of the Arkansas Deceptive Trade Practices Act

(“ADTPA”), the Arkansas School Calendar Act, and the Arkansas Telephonic Sellers Act. 

Additionally, M.S. seeks relief for breach of implied contract and unjust enrichment. 

II. USP’s Motion to Dismiss

In deciding a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), all

facts alleged in the complaint are assumed to be true. See Doe v. Northwest Bank Minn., N.A.,

107 F.3d 1297, 1303-04 (8th Cir. 1997). The complaint must be reviewed in the light most

favorable to the plaintiff, see McMorrow v. Little, 109 F.3d 432, 434 (8th Cir. 1997), and should

not be dismissed unless it is clear beyond doubt that the plaintiff can prove no set of facts

thereunder which would entitle him or her to relief. See Hafley v. Lohman, 90 F.3d 264, 266 (8th

Cir. 1996). The Court may grant a motion to dismiss on the basis of a dispositive issue of law. 

Neitzke v. Williams, 490 U.S. 319, 326 (1989).

USP asserts that M.S. fails to state a cognizable claim under any of the asserted grounds

for relief and that it is clear that M.S.’s class action allegations should be stricken. The Court

will address each argument separately. 

ADTPA

The ADTPA prohibits knowingly making false representations as to the sponsorship of

goods or services, see Ark. Code Ann. § 4-88-107(a)(1), as well as engaging in “any other 

unconscionable, false, or deceptive act or practice in business, commerce, or trade.” Ark. Code

Ann. § 4-88-107(a)(10). The ADTPA provides a private cause of action for any person who

suffers actual damage or injury as a result of practices declared to be unlawful under the Act. 

See Ark. Code Ann. § 4-88-113(f).

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1

USP also argues that M.S. fails to “identify a single deceptive statement on the part of

USP.” However, M.S. plainly alleges that USP falsely represented that it was selling advertising

space on behalf of ATU. 

2

Even without the handwritten note, the invoice presented in support of USP’s motion is

not the same invoice attached to the complaint. Compare docket entry #1, Ex. A, with docket

entry #16, Ex. #1.

M.S. alleges that it paid USP for the advertisement that appeared in the 2004-2005 ATU

football program, even though it never agreed to purchase the advertisement prior to its

publication. According to M.S., it paid for the advertisement because it wanted to maintain a

good business relationship with ATU, and it believed USP’s claim that it was acting on behalf of

ATU.

Despite these allegations, USP asserts that M.S., by its own admission, did not rely on

USP’s alleged representations that it was acting on behalf of ATU.1

 USP submits a document,

which it claims is a copy of the invoice that M.S. returned unpaid in 2004. The invoice

submitted by USP is not the same invoice attached to the complaint, which M.S. has identified as

a true and correct copy of the 2004 invoice. Compare docket entry #1, Ex. A, with docket entry

#16, Ex. #1. The invoice presented by USP contains the following handwritten note:2

 “Bogus

ad. This is a national publication that solicits ads in different cities then sends a page listing the

subscribers to a particular University. Per Sports Athletic Director @ ATU.” Docket entry #16,

Ex. #1. 

USP states that the handwritten note establishes that M.S. did not rely on USP’s alleged

representation that it was selling ad space on behalf of ATU. However, M.S. alleges in the

complaint that after it returned the invoice unpaid, it received calls from USP agents who stated

they were acting on behalf of ATU. Accordingly, even assuming that the invoice submitted by

USP can be considered at this juncture, it does not contradict M.S.’s allegation that it paid for the

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advertisement because it believed that “USP had actually been calling M.S. . . . on behalf of

Arkansas Tech and that . . . payment of the invoice would therefore be used to support the

Arkansas Tech football and athletic programs.” Docket entry #1, ¶ 24. 

USP contends that M.S. has failed to allege damages because M.S. received “exactly

what it bargained for” and the “only complaint is that it paid more than what it could have paid

had it purchased the advertising directly from Arkansas Tech.” Docket entry #16, at 12-13. 

According to USP, M.S.’s alleged damages amount to nothing more than diminution in the value

of the product received, which is not a cognizable injury under the ADTPA. USP cites Wallis v.

Ford Motor Co., 362 Ark. 317, 208 S.W.3d 153 (2005), in support of this argument. 

In Wallis, the plaintiff sued under the ADTPA alleging that the manufacturer of an SUV

concealed a design defect, which led him to purchase the vehicle at a price in excess of its actual

value. The plaintiff did not allege personal injury or property damage, nor did he claim that the

SUV malfunctioned in any way. The Supreme Court of Arkansas held that “actual damage or

injury [under the ADTPA] is sustained when the product has actually malfunctioned or the

defect has manifested itself. Where the only injury is the diminution in value of the product, a

private cause of action is not cognizable under the ADTPA.” Wallis, 363 Ark. at 328, 208

S.W.3d at 161.

In Walllis, the plaintiff could not prove that he did not receive the vehicle he bargained

for because the vehicle had not malfunctioned. Unlike the plaintiff in Wallis, who suffered a

purely pecuniary loss, M.S. is not alleging that it purchased a product with less economic value

than represented by the seller. Instead, M.S. claims that it paid for a product that was not at all

what USP represented–that is, an advertisement sold on behalf of ATU. The Court finds that

M.S. has alleged sufficient facts to satisfy the ADTPA’s actual damage requirement.

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Among the statutes providing per se violations of the ADTPA are statutes regulating

charitable disclosures, see Ark. Code Ann. § 4-103-204(a)(1); credit card debt transfers, see Ark.

Code Ann. § 4-107-203(a)(1); price gouging, see Ark. Code Ann. § 4-88-304(a)(1); caller ID

blocking, see Ark. Code Ann. § 4-99-303(a); and home solicitation sales, see Ark. Code Ann. 

§ 4-89-106(a)(1).

Arkansas Telephonic Sellers and School Calendar Acts

M.S. charges that USP violated disclosure requirements set forth in two consumer-related

Arkansas statutes: the School Calender Act, codified at Ark. Code Ann. §§ 4-88-501 through

503, and the Telephonic Sellers Act, codified at Arkansas Code Ann. §§ 4-99-101 through 112. 

Both statutes provide that a violation of statute provisions constitute a per se violation of the

ADTPA. See Ark. Code. Ann. §§ 4-88-503(a), 4-99-111(b). Additionally, both Acts provide

that all remedies, penalties, and authority granted to the Arkansas Attorney General under the

enforcement provision of the ADTPA shall be available to the Attorney General for enforcement

purposes under the separate statutes. See Ark. Code Ann. §§ 4-88-503(b), 4-99-111(b). 

USP argues that neither the School Calendar Act nor the Telephonic Sellers Act provide

a private cause of action and that the Arkansas Attorney General alone has authority to enforce

the statutes. 

In 1999, the Arkansas legislature extended a private cause of action under the ADTPA to

“any person” who suffers actual damage or injury as a result of a violation of the Act. See Ark.

Code Ann. § 4-88-113(f). The ADTPA prohibits a variety of listed practices and includes a

catchall provision prohibiting “any other unconscionable, false, or deceptive act or practice in

business, commerce, or trade.” Ark. Code Ann. 4-88-107. Nothing in the ADTPA indicates that

the private right of action extended to consumers excludes violations of the numerous Arkansas

statutes that make a violation of those statutes a per se violation of the ADTPA.3

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Although the Telephonic Sellers Act and the School Calendar Act do not provide a

private cause of action for consumers, a violation of either statute constitutes a deceptive trade

practice under the ADTPA, and any person who suffers actual damage as a result of such a

practice has a cause of action under the ADTPA. The Court finds that M.S.’s claims regarding

violations of the Telephonic Sellers Act and the School Calendar Act are actionable under the

ADTPA. 

Breach of Implied Contract

M.S. seeks relief under an implied contract theory, alleging that “USP impliedly

promised that the consideration provided by M.S. . . . would be used to support a particular

school.” Docket entry #1, ¶¶ 70-71. USP argues that M.S. fails to state a claim for breach of

implied contract because (1) an express contract existed between the parties, which precludes

relief under an implied contract or unjust enrichment theory; (2) M.S. does not allege that USP

promised to remit money to ATU; and (3) even if USP made such a promise, MS is has no

standing to bring a claim for breach.

Express Contract. USP asserts that “M.S.’s . . . implied contract and unjust enrichment

claims are precluded because [an express contract] governed the 2004 transaction between USP

and M.S. . . . as evidenced by the invoice USP sent to M.S.” Docket entry #16, at 14. According

to USP, its invoice to M.S. amounted to a written offer, which M.S. accepted through payment. 

But M.S. alleges that it returned the invoice unpaid, and it made payment only after it received

telephone solicitations from USP agents who claimed that USP was acting on behalf of ATU and

after an advertisement for M.S. appeared in ATU’s football program. M.S. further alleges that it

Case 4:07-cv-00730-SWW Document 33 Filed 01/07/08 Page 8 of 13
paid USP out of a desire not to jeopardize its business relationship with ATU. M.S.’s

allegations, which the Court must accept as true at this stage in the case, do not support a

conclusion that USP’s invoice represents an express contract between the parties. 

Promise. USP asserts that M.S. fails to allege any promise made by USP to “specifically

remit money” to ATU. Under Arkansas law, a promise is an indispensable element of every

contract, but a promise may be inferred. See Phillips v. Marist Soc. of Washington Province, 80

F.3d 274, 276 (8th Cir. 1996)(citing Downtowner Corp. v. Commonwealth Securities Corp., 243

Ark. 122, 124, 419 S.W.2d 126, 128 (1967)). The terms of a contract implied in fact can be

inferred from conduct, and the conduct of the parties is to be evaluated from the point of view of

a reasonable person, considering all of the attendant circumstances. Id.(citation omitted). 

Here, M.S. alleges that USP represented that it was selling advertising space on behalf of

ATU, which implied that payment for advertising space would be remitted to ATU. M.S. is not

required to allege that USP expressly promised to remit payments to ATU, and the Court finds

that M.S. has sufficiently alleged an implied promise. 

Standing. USP argues that only ATU has standing to sue for breach of the alleged

promise to remit money to ATU. This argument is without merit. M.S. is suing for beach of an

implied contract between USP and M.S. As a party to the contract, M.S. certainly has standing

to sue. 

Class Action Allegations

 In the complaint, M.S. describes the putative class as thousands of persons and/or

businesses located in the United States who purchased advertising from USP. The complaint

allegations indicate that putative class members will pursue claims under the trade practice and

consumer-related statutes and common law existing in each of the fifty states. 

Case 4:07-cv-00730-SWW Document 33 Filed 01/07/08 Page 9 of 13
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“Although in some cases a district court should allow discovery to aid in the

determination of whether a class action is maintainable, the plaintiff bears the burden of

advancing a prima facie showing that the class action requirements are satisfied or that discovery

is likely to produce substantiation of the class allegations.” Montolete v. Bolger, 767 F.2d 1416,

1424 (9th Cir. 1985). 

Federal Rule of Civil Procedure 23(a) lists four criteria for the maintenance of a class: 

(1) that the class be so numerous that joinder of all members is impracticable; (2) that common

questions of law and fact exist among potential class members; (3) that claims or defenses of the

representative parties are typical of the claims or defenses of the class; and (4) that representative

parties will fairly and adequately protect the interests of the class. In addition to the numerosity,

commonality, typicality, and adequacy of representation requirements, a proposed class must fall

in to one of three categories in Rule 23(b). M.S., the only named plaintiff, shoulders the burden

to show that each requisite for class certification is met in this case. 

USP asserts that it is clear from the complaint that M.S. is unable to establish the

requirements for class certification under Rule 23(a), particularly the commonality requirement. 

USP points out that claims brought under a variety of state deceptive trade practices acts are ill

suited for class action treatment because differences in state laws and individual questions of

reliance and causation will overwhelm any common issues. 

M.S. does not respond to the substance of USP’s argument and asserts that the issue of

class certification is premature. The Court disagrees. Rule 23(c) requires district courts to make

a determination as to whether a class action is maintainable “as soon as practicable after the

commencement of an action.” In some cases, the propriety of certifying a class action can be

decided before a motion for certification is filed and even before discovery on the certification

issue.4

 “Sometimes the issues are plain enough from the pleadings to determine whether the

interests of the absent parties are fairly encompassed within the named plaintiff’s claim, and

Case 4:07-cv-00730-SWW Document 33 Filed 01/07/08 Page 10 of 13
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sometimes it may be necessary for the court to probe behind the pleadings before coming to rest

on the certification issue.” General Telephone Co. v. Falcon, 102 S. Ct. 2364, 2372 (1982). 

The Court finds that the issues raised by USP regarding class certification merit

resolution as soon as possible. Although the Court finds that these questions can be resolved as a

matter of law and without discovery, the Court will give M.S. an opportunity to file a more 

substantive response before deciding whether the class allegations should be stricken. 

III. USP’s Motion for Protective Order and M.S.’s Motion for Sanctions

On December 5, 2007, USP filed a motion for a protective order, asking the Court to stay

or limit discovery pending a decision on USP’s motion to dismiss. USP argues that limiting

discovery to matters relevant to M.S.’s individual claims will obviate the need for timeconsuming and burdensome discovery. According to USP, such limited discovery will establish

that during the relevant time period, USP was operating pursuant to an agreement with ATU,

which authorized USP to sell advertising on behalf of the University. By way of example, USP

submits a copy of a document that it claims is a contract giving USP the right to sell advertising

space on behalf of ATU. See docket entry #25, Ex. J. USP also submits a copy of a letter that it

claims is “a letter to MS . . . from the Sports Information Director at Arkansas Tech explicitly

stating that USP was ‘selling advertising on [ATU’s] behalf in connection with the official

Arkansas Tech Football program.’” Docket entry #25, Ex. K.

In response to USP’s motion for a protective order, M.S. filed a motion for sanctions

asserting USP fraudulently created the aforementioned documents submitted in support of its

motion for a protective order. According to M.S., “that USP resorted to attaching these

documents speaks volumes with regard to the propriety of its current motion . . . . ” Docket entry

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#29, at 3. USP denies M.S.’s charge and seeks an opportunity to conduct limited discovery to

prove that the documents are authentic.

Even without considering the documents submitted in support of USP’s motion, the

Court finds that in the interest of efficient case management, discovery regarding putative class

claims should not proceed before a decision on USP’s motion to dismiss or strike class

allegations. USP’s motion for a protective order will be granted, and discovery may proceed

only with respect to M.S.’s individual claims. 

As for M.S.’s motion for sanctions, it is impossible to determine on the present record

whether the documents submitted by USP are authentic. Accordingly, the motion for sanctions

will be denied without prejudice. Discovery regarding M.S.’s individual claims will no doubt

include an investigation into the authenticity of the documents at issue, and M.S. may elect to

resubmit its motion after such discovery takes place.

IV. Conclusion

IT IS THEREFORE ORDERED that Defendant’s motion to dismiss (docket entry #15) is

DENIED to the extent that Defendant seeks dismissal of Plaintiff’s individual claims. To the

extent that Defendant seeks dismissal of class allegations, the motion to dismiss is HELD IN

ABEYANCE.

IT IS FURTHER ORDERED that Plaintiff has up to and including fifteen days from the

entry date of this order in which to file a response to Defendant’s motion to dismiss class

allegations. 

IT IS FURTHER ORDERED that Defendant’s motion for a protective order (docket

entry #24) is GRANTED to the extent that all discovery regarding class allegations is stayed

Case 4:07-cv-00730-SWW Document 33 Filed 01/07/08 Page 12 of 13
5

The Attorney General filed the amicus brief along with his motion. Although the

Attorney General takes no stand as to the merits of Plaintiff’s claim, he asserts that Plaintiff has 

has a private right of action to enforce the School Calendar and Telephonic Sellers Acts by way

of the ADTPA. See docket entry #22, attachment.

13

pending resolution of Defendant’s motion to dismiss class allegations. Discovery may proceed

as to Plaintiff’s individual claims only.

IT IS FURTHER ORDERED that Defendant’s motion for a hearing (docket entry #26) 

is DENIED AS MOOT.

IT IS FURTHER ORDERED that the Arkansas Attorney General’s motion seeking leave

to file an amicus brief (docket entry #22) is GRANTED.5

IT IS FURTHER ORDERED that Plaintiff’s motion for sanctions (docket entry #28) 

is DENIED WITHOUT PREJUDICE.

IT IS SO ORDERED THIS 7TH DAY OF JANUARY, 2008.

/s/Susan Webber Wright

UNITED STATES DISTRICT JUDGE

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