### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE August 6, 2002 Session STATE OF TENNESSEE V 

### . TRAVI S THOMPSON, I NDIVIDUALLY AND DOING BUSINESS AS 

### T HOMPSON 

### E NTERPRISES 

### , LLC AND 

### G OLD 

### ’ S 

### G YM 

### , AND 

### THOMPSON ENTERPRISES, LLC, A 

### D ELAWARE 

### L IMITED 

### L IABILITY 

### C OMPANY 

### , DOING BUSINESS AS 

### G OLD 

### ’ S 

### G YM Appeal from the Chancery Court for Davidson County No. 99-2003-III Ellen Hobbs Lyle, Chancellor

No. M2001-02354-COA-R3-CV - Filed Mar ch 20, 2003

This case involves the Tennessee Health ClubAct. The defendant/appellees purchased a health club andfailed to obtain a certificate of reg istration. Three months later, the health club owners obtained a certificate of registration. The State of Tennessee, through the Attorney Genera l, filed a lawsuit agains tthe health club owners alleging violat ions of t he Tennessee Consumer Protection Act and the Health Club Act seeking injunctive relief, substantial fines, and several hundred thousand dollars in restitution. The tria

l court g ranted p artial su

mmary judgmen t to the health club owners, holding that the remedies under

the Health Club Act were available only to consumers, not the State, and that there was no proof of

an “asc ertaina

ble loss” under the

Tenness ee Consum

er Prote ction Act

. The trial court also granted t

he h ealth clu

b owners ’ reque st for att orney ’s feesand costs . The State appeals

. We affir

m in part a

nd reverse in par

t, finding, inter alia, that the State may seek remedies under the Health Club Act on behalf of consumers, affirming the trial court’s ruling that proof of an ascertainable loss is required, and affirming the award of attorney ’s fees. Tenn. R. App.P. 3 Appeal as of Right ; Judgme nt of the Cha

ncery Court is Rev

ersed in Part and Affirmed in Part H OLLY K IRB Y L ILLARD , J ., del ivered the opinion of the court, in which A LAN E. H IGHERS , J., and D AVID R. F ARMER , J., joined. Paul G. Summers , Attorne y General and Repor

ter; Timot hy C

. Phillips, Assistant Attorney Genera l; andDana M. Ausbrooks, Assistant Attorney General, Nashville, Tennessee, for appe llants, State of Tennessee. William B. Jakes, II

I, for appelleesTravis Thompson, Individually and doing business as Thompson Enterpr ises, LL C and Gold’s Gym, and Thompson Enterpr ises, LL C, aDelawa

re L imited L iability Company , doing business a s Gold’s G ym.1 Th omp son E nterp rises, LL C is co mpr ised o f Tho mps on an d var ious m emb ers of his fa mily. It appear s that

Thompson purchased the additional m embe rships in his name, do ing business as T homp son En terprises, LLC, but t hat Th omp son E nterp rises, LL C wa s not ac tually form ed un til June 2 4, 19 99.

2 Thompson and T hom pso n En terprise s, LLC will be co llectively refer red to as “Thomp son,” except where the senten ce ind icates a referen ce to T hom pso n individ ually.

3 Secti on 47-18- 302 of t he Tennes see Code Annotate d stat es in part: “(a) It is unlawful to operate a health club unless a valid certi fica te of regist rati on is obt ained f

or each l ocation w here heal th cl ub servi ces or f acil iti es are provi ded and payment of the fee required f or such registr ation is made. . . .” Tenn. Code Ann. § 47-18 -302(a) (2001). 4 Tenn. Cod e Ann. §§ 47-18-30 1 to -320 (2001 ). 5 Thompson ar gued t

hat the fi rst

att empt t

he St ate made to conta ct t he Clu b was May 10, 1999. 6 Tenn. Cod e Ann. §§ 47-18-30 1 to -320 (2001 ). 7 Tenn. Cod e Ann. §§ 47-18-10 1 to -125 (2001 ). -2- OPINION Defendant/Appellee

Travis Thompson purchased a Gold’s Gy m (“Club”) in Antioch, Tennessee on Marc h 1, 1999 a nd bega n operat ing the g ym o n April 16, 1999. At th e time of t

h e purchase, the Club had approxima tely 600 to 700 me

mbers, a nd was ad ding ap proximatel

y tw en tyfive members e ach month . In a ddition, Thompson, under the n ame of Thompson Ente rprises, LL

C, 1 purcha sed at least 2000 membership agreements from another local health club. Defend ant/Appe lle e Thompson Enterpr

ises, L LC (T ravis Tho mpson and T

hompson En

terprise s, LL

C, collectively "Thompson") 2 began operating the Club on June 24, 1999. At the time Thompson purchased the Club, it had no certificate of registration, as manda ted by section 47-18-302, 3 the provision of the TennesseeCode Annotate d that re gulate s health c lubs, sometimes referred to as the Health ClubAct. 4 Th ompson wa s unawar e of his r esponsibi lity

to obtain a certificate of registration for the Club. Appellant/State of Tennessee (“State”) alleg ed that it contacted Thompson by ma il and telephone numerous times during April and May 1999 reg arding the lack of a certificate of reg istration. 5 Thompson applied for a certificate of reg istration on June 22, 1999, and it was issued on July 1, 1999. Thus, Thompson had operated Gold’sGym for a pe riod of approximately three months without a valid ce rtificate of registration. O n Ju ly 1 6, 1999, the Attorney Ge neral, on behalf of the State’s Division of Consumer Affairs of the Department of Commerc e a nd Insurance, filed a lawsuit against Thompson and Thompson Enterpr

ises alle ging violation of the Hea lth Club Ac t, 6 and t he Ten nessee Consumer Protection Act (“Consumer Protection Act”). 7 The State request ed, inter alia, tha t:

. . . [T]his Court make such orders or render such judgments as may be necessary

to restore to any

consumer

or other person a ny a scerta inable losses suffered by

reason8 Section 4 7-18-30 3 of the T ennessee C ode A nnotated states:
A health club agreement shal l be unenforceable against the buyer, and th e buye r shall be entitled to a ref und l ess that

porti on of

the t otal pr ice whi ch repres ents a ctual use of the f acil iti es and less the cost of go ods and se rvices c onsu med by the b uyer if:

. . . . (2) The health club fails to ob tain or fa ils to ma intain a ce rtificate of re gistration as req uired by this part; . . . Te nn. Co de A nn. § 4 7-18 -303 (20 01)

.

9 Section 4 7-18-10 8(b) o f the Tenne ssee Co de An notated p rovides: (b) (1) The court

may make such o rder s or ren der su ch jud gme nts as ma y be ne cessa ry to resto re to any person who has suff ered any a scert ainabl e loss by reas on of th e use or em ploym ent of s uch unlawful metho d, act, o r prac tice, any m one y or pr ope rty, real, pe rsona l, or mixed, or any ot her arti cle, com mod ity, or thi ng of val ue whe rever

si tuat ed, wh ich may ha ve been acqui red by means of an y act or p ractice decla red to be un lawful by th is part. (2) The court may also ent er an ord er tem por arily or p erma nently rev oking a license or ce rtificate authorizing that

person t o engage i n busin ess i n thi s st ate, if evidence h as been presented to the court estab lishing kno wing an d pe rsistent vio lations o f this part. (3) The court

may al so orde r pay ment to the st ate of a civil penalty of not more than one thousand dolla rs ($1 ,000 ) for ea ch vio lation. (4) The court may also ord er reim burse men t to the state for the re ason able c osts and expe nses of investiga tion an d pr osec ution o f actions unde r this par t, includin g attorn eys’ fees.
Te nn. Co de A nn. § 4 7-18 -108 (b) (2 001 ). -3- of the alleged violations of the Tennessee Consumer Protection Act, including but notlimited to requiring that Defendants notify in writing each and every consumer that entere d into a he alth

club ag reemen t with Def endants w hile Def endants were not registered or the health club’s registration had lapsed, or w e re purchas ed by Defend ants from an u

nregis tered he alth club

or purch ased by

Defend ants while unregistered, that the agreement is unen forceabl e against the consumer and the consumer is entitled to a refund less that portion of thetotal pric e which r eprese nts actual use of the

facilitie s a nd less the cost of goods and services consumed by the consumer as provid ed in [section 47-18-303 of the Tennessee Code Annotated] 8 plus statutory interest. The State sought civil penalties of $1,000 for each violation, as provided in section 47-18-108(b) of the Tennessee Code Annotated. 9 The State later am ended itscomplain

t to include

an additi onal10 Section 4 7-18-32 0 of the T ennessee C ode A nnotated states: (a) A violation of t

his part consti tutes a vi olation of t he Tenn e ssee C onsu mer P rotec tion A ct, com piled in part 1 of this cha pter. (b ) For th e pur pos e of ap plicatio n of the T enne ssee C onsu mer P rotec tion A ct, any vio latio n of th e provisions of this part shall be construed to constitute an unfair or deceptive act or practice aff ecting the conduct

of any trade or c ommerce and subject to th e penalties an d remedies as provided by t hat act. Tenn. Code Ann. § 47-18- 320 (2001). Thus, a vi olation of the Healt

h Club Act’ s re quir ement fora cer ti fi cate of registration is per se a viola tion of the Co nsum er P rotec tion A ct as we ll. -4- request : That the court order that Defendants notify each and every

consumer

that ente red into a health club agree

ment with D efenda

nts while Defendants were not registered or the health c lub’s registration had lapsed, or were pur chased by D efendants from an unregistered

health c lub or pur

chased by D efenda

nts while u

nregis t ere d, that the agree ment

is unenforceable against the consumer and the consumer is entitled to a refund less that portion of

the total p

rice whi ch repr

esents actual use of the facilities andless the cost of goods and services consumed by th e consume

r as prov ided in [section 47 -18-303 o f the Ten nessee C ode Annot

ated] plus s tatutory

interest

. The Answer filed by

Thompson included a defense of selective prosec ution. The State sought a temporary injunction, seeking to require Thompson to notify all members tha ttheir agreements were une nforceable during the period of time in which the Club ha d n o certifi cate of registration, and informing them of various remedies, including r efunds and restitution. The trial cou

rt gra nted the injunction , requir ing Thom pson to send letters to consumers who entered into an agreement with Gold’s Gy m during the pertinent

time fra mes. Each letter w as to inform the consumer that his health club agreement may be unenforceable, and that he may be entitled to a refund or other remedy

. Prior to trial, the parties filed a my riad of motions andcross moti ons. As a resu lt of these motions, the trial court held, inter alia, that Thompson had violated the Health Club Act and consequ ently

also violated the Consumer P rotectio n Act. 10 In deciding the State’s first motion for partial summary judgme

nt, the trial court determined that the remedies in the Consumer Protection Act were not exclusive , and that the State was per mitted to pu

rsue the remedie s availa

ble under both the Health Club Act, section 47-18-303, and the Consumer Protection Act, section 47-18-108. The trial court noted that the Health Club Act, section 47-18-320(b), specifically makes the remedies of t he Consumer Protection Act available upon a violation of the Health Club Act, and the remedie s availab le under the Consumer Protection Act are not the exclusive remedies available to the State.11 Secti on 47-18-112 o f the Tennessee Code Anno tated stat es: “The powers and remedies provided in thi s part

shall be cumulative and s upplementar y to al l othe r powers and remedi es other wise pr ovided by l aw. The inv ocati on of one power or remedy herein shall not be construed as excludi ng or prohibiting t he use of any other a vailab le rem edy.” Tenn. Cod e Ann. § 47-18-112 (2001). -5- See Tenn. Code Ann. § 47-18-112. 11 Thus, the remedies listed in th e Health Club Act, section 47- 18-303, would also be available to the State. In its order on the State’s sec ond motion for partial summary judgmen t, howeve r, the tri al court held tha t the State was limited to the remedies in the Consumer Protection Act. The trial court stated: [Section 47-18-30 3(2) of t he Heal th Club Act

] provid es that t

he conduct of the defenda nts in not obta

ining registra

tion caus es a buy

er’s co ntract to

be unenf orceab le agains tthe buyer, a

nd the buyer is e ntitled to a refund less that portion of the total price which represents actual use of the facilities and less the cost of goods and services consumed by

the buyer. While a consumer/buyer c ould use section 47-18- 303 as a remedy pr

ovision against a health club, the Court determines that the plaintiff, State of Tennessee is requ ired to pu

rsue its r emediesa s t o vindicating consumers as providedfor in [section 47-18-108(b)(1)] of the Tennessee Consumer Protection Act. Hence, the trial

court ultimately

determined that the State ma y not pursue a

reme dy throug h the Health Club Act, section 47-18-303, but rather through the Consume

r Protec tion Act, section 47-18- 108. The tria

l court dis missed the

State’s r equest th at Thompso n be requ ired to pa y r estituti on t o consumers und er sect

io n 47-18-104, finding that the State had not proffered e vidence of any “ascer tainable loss” by a consume

r as req uired by the Consume

r Protec tion Act. The trial court dismissed Thompson’s claim of selective prosecution. After resolution of

the pretrial motions, the issues remaining for discovery and trial were: (1) whether Thompson caused a likelihood of confusion or misunderstanding as to its certifica tion under section 47-18-104(b)(2) of the Consumer Protection Act; (2) whether Thompson’s actions represented

that a consumer transaction conferred or involved rights, remedies, or obligations that it did not have, pursuant to section 47-18-104(b)(12); and (3) whethe r the acts were unfair or deceptive to consumers, under section 47-18-104(b)( 27), of the Consumer Protection Act. During di sc ov er y, Thompson s ent inter rogato ries to the State, as king the

State todetail the relief it sought. After discovery skirmishe s, the Stat

e sent Thompson a letter stating that it was seeking refunds on behalf of the health club members in the amount of $929,030.03, to be reduced based on Thompson’s proof with respect to actual use. The case was heard by

a jury on Fe

bruary 5, 2001. At

the hearing, the State called Thompson andKenneth

Wright, a

former general

manage r of th e Cl ub. The State also called Ray Palumbo (“Palumbo”), a former member of Powerhouse Gy m, w hose contract was among those purcha sed by Thompson. Palumbo cancelled his contra ct with Powerhouse, but even after he cance lled,12 The State, in its complaint, requested injunct ive reli ef t o enjoin Thompson fr om engaging in act s and practices that the S tate allege d vio lated the He alth Clu b Ac t and the Co nsum er P rotec tion A ct, such a s repr esenting th at th e agree men ts in que stion we re enfo rceab le. -6- Thompson continue d effor ts to coll ect on P alumbo’s account. The State identified no consumers seeking relief because of

the Club’s lack of a valid certificate of reg istration. At the end of

the State’s proof, Thompson’s counsel moved for a directed ve rdict, arguing that there was no evidence that he had committed

a deceptive act, no proof that anyone was confused or misled because of the Club’s failure to have a ce rtificat e of registration, and no proof of continuing harm, which would be necessary to justify the injunctive relief the State re questedin its complain t. 12 The trial court granted Thompson’s motion for directed verdict. Since the trial court haddeterminedprior to trial that Thomp son’s fa ilure to r egiste r the Club w as per se a violation of the Consumer P

rote ction Act , the trial court fined Travis Thompson individually a nd Thompson Enterprises $1 ,0 00 ea ch . F in al ly, the trial court ag reed to h ear the State’s r equest f or costs, expenses, andattorne

y’ s fees, but limited the request to the period of time prior to the filing of the lawsuit. After a subsequent hear

ing, the trial cou rt order ed that Thomp son pay

the St ate fees and expenses incurred before the lawsuit was filed, which a mounted to $1,490.40. The trial court also, however, ordered that the State pay Thompson $10,0 00 in attorney’s fees pursuant to the Equal Accessto Justice Act of 1984, s ections 2 9-37-101 to -106 of the Tennessee Code Annotated. The trial c our t reasoned that the State’s failure to produce a single health club member with any ascert ainable loss to supporta

claim for restitution, and the

State’s f ailure to even att empt to loc ate such a pe rson until three weeks before the trial, re ndered the State ’s “cla

im against the defendant s for restitution for asc ertaina

ble loss to consumers” unsupported by substantial evidence. In the tria l court’s oral ruling awarding attorney’s f

ees and costs to Thompson, the trial judge stated:

. . . . Th e defen

dants hav e never

disputed t

hat for th ree mont hs they were no t in compliance with the statutes requiring health club registration. Upon learning of the necessity of the registration, the defendants obtained the registration. Based upon the defe ndants’ noncompliance , the State reasona bly expended resourc es prior

to the dat e the defenda

nts beca me reg istered (

July 2 , 1999) to investig atethe de fendant s’ violation and obtain the defendants’ compliance. For this reason the Court a wards the State its a

ttorney s fees a

nd costs incurred

prior to f iling the lawsuit in

the abovecaptionedmatter for

the efforts expended in bringing the defe ndants into compliance. But once the defenda nts came into compliance, the State continued to pursue this matt er by fili ng a lawsuit and seeking not only

fines and fees connected with the noncompliance, but also restitution for harm to consumers resulting from the lack of registration. The State has admitted that from the date t he lawsu it was file d not a single consumer ever complained or alleged harm due to nonregistration. In that the defendants acknowledged and admitted from the outset and in their answer the three month period

of not being registered, the major component of the-7-

discovery and costs incurred in this case pertained to the defendants defending against the restitution claim. The Court ultimately awarded the plaintiff $1,000.00

in fines to be imposed upon defendant Travis Thompson and $1,000.00 in fines to be imposed upon defendant Thompson Enterprises, LL C for being unregistered by the State for three months. As to the claim for restitution, the Court dismissed that cause of action on summar yjudgmen t as to some alleged violations of the Tennessee Consumer Protection Act and by directed verdict at trial as to the remaining ones but not until costly disc overy and

motions had been pursued to defend against the re stitution claims. Plaintif

f’s counsel has admitted to the Court (in a hearing on Febr uary 2, 2001) that from

the day the lawsu

it was filed not a single c onsumer had ever complainedor alleged ascertainable loss due to the de f endants’ brief period of not being registered. The plaintiff also stated that it had n ot made any e f fort to loc ate witnesses t o support the restitution claims until three weeks before the trial. The Courtconclude s that the p laintiff ’s claim a gainst t he defe ndants fo r restitu tio n for ascertainable loss to consumers was unsupported by substantial evidence. Fees incurred by

the defendan ts easily exceed the maximum recover y of $10,000.00 authorized by Tennessee Code Annotated section 29-37-104. The record

also esta blishes tha

t the def endants made an o ffer of

judgmen t in this matter on March

14, 2000, in the amount of $2,000.00. The Court determines that the defendants were the

prevailing parties in this matter because they prevailed on 16 of the 17 theories asserted by the State. The only theory the defendants did not prevail on was one on which th ey had a dmitted liability from the beginning . The judgme ntfinally obtained in this matter was not more f avorable than the offer of judgmen t. Costs of $848.00 for depositions and a court re por ter fee were incurred by the defe

ndants in this matter. Thus, the trial court awarded the State a minimal amount of fees a nd costs, while a warding Thompson the maximum amount of attorne y’ s fees a vailable under the Equal Ac cess toJustice Ac t, as well a s costs. Th

e State no w appea

ls. On appeal, the St ate a rgues t hat the tr ial cour t erred in holding

that the r emediesavailab le to the State under the Health Club Act are limited to the remedies prov ided inthe Consumer Protection Act; that

the trial court er red in hol ding tha

t consume rs did notsuffer an asce rtainab le loss as contemplated in the Consumer Protection Act, section 47-18-104(b)(2); that the trial court erred i n denying

the State’s motion for partial summary judg ment on several issues; that the trial cou r t erre d in granting Thompson’s motion for directed verdict; and f inally, that the trial court er red i n awarding attorney ’s fees to Thompson under the Equal Access to Justice Act of 1984.-8-

As to the State’s issue on appeal regardi n g Thompson’s motion for partial summary judgmen t, a motion for summary judgment should be granted when

the movant demonstrates that there are no genuine issues of material fa ct and that the moving pa rty is entitle d to a judgme

nt as a matter of law. Tenn. R. Civ. P. 56.04. The party moving for summary judg

ment bears the burden of demonstrating that no genuine issue of material fa ct exists. Bain v. Wells , 936 S.W.2d 618, 622 (Tenn. 1997). On a motion for summary judgmen t, the cou rt must tak

e the strongest legitimate

view of the evidence in favor

of the nonmoving party, a llow all reasonable inferences in favor of that pa rt y, and discard all countervailing evidence

. Id. Summary judgmen t is only appropriate when the facts and the legal conclusions drawn f rom the fa cts rea sonably

permit only one conclusion. Carvell v. Bott oms , 900 S.W.2d 23, 26 (Tenn. 1995). Since only questions of law a re involved, there is no presumption of correctness rega rding a trial court’s grant of summary judgme

nt. Bain , 936 S.W.2d at 622. Therefore, our review of the trial court’sgrant o f summary judgmen t is de novo on the record before this Court. Warren v. E state of Ki

rk , 954 S.W.2d 722, 723 (Tenn. 1997). Moreover, the interpretation of statutory law is a judicial function, State ex rel. Comm’r of Transp. v. Med. Bird Black Be ar White Eagl

e , 63 S.W.3d 734, 754 (Tenn. Ct. App. 2001) (citations omitted), and it is ou

r role to “ ascert

ainand give ef

fect to the intention and purpose of the legislature.” Gleave

s v. Check

er Cab Trans it Corp. , 15 S.W.3d 799, 802 (Tenn. 2000) (quoting Carson Creek Vacation Resorts, I nc. v. State Dep’t of Re venue , 865 S.W.2d 1, 2 (Tenn. 1993)). We address first the State’s argument that the tr

ial cour t erred in holding

that the Sta

te was notentitled to relief under the Consumer Protection Act because it failed to produce evidenc e that a consumer had sustained an “a s certainable loss” stemming from the Club’s failure to have a certificat e of registration for a three-month per iod. This holding was based on a provision in the Consumer

Protection Act, section 47-18-108(b)(1) of the Tennessee CodeAnnotate d. The sta tute provides : The court may make

such orders or render such judgme nts as may be nec essaryto restore to any person who ha s suffered an y ascertai

nable loss by reason of

the use or employment

of such unlawful method, act, or practice, any money or propert y, r eal, persona l, or mixed, or

any other ar ticle , commod ity, or thing of va lue wherever situated, which may have been acquired by means of any act or pr actice declar ed to be unlaw ful by

this part. Tenn. Code Ann. § 47-18-108(b)(1) (2001) (emphasis added). I n granting Thompson’s motion for partial summary judgment on this issue, the trial court stated:

. . . . The record before

the Court fails to demonstrate any person who has suffered any ascertainable loss by

reason of the defendants failing to informthe consumer that the health c lub is not lic ensed. Sp ecifica lly, the State

acknowl edgesin its resp onse to the defendants’ motions to dismiss, which response was filed, July 31, 2000, that it has responded to the defendants’ discovery there are no members whom the-9-

pl aintiff knows entered into agreements with the defe ndants because of t

h e representation that Gold’s Gy m was duly reg

istered with the State. . . . Thus, the trial court dismissed the State’s claim for restitution under the Consumer Protection Act because the State could not i dentify

an asce rtainab le loss. On appeal, the State

asserts t hat it wasnot requi

red to pr oduce a consume r because actual deception need not be proven. The State also argues that consumers suffe redan asce

rtainab le loss because they were un able to c ancel their hea lth club c ontract s. Here, the State sought, and was granted, injunctive relief requiring Thompson to send letters to consumers with health club contracts, notifying them that their health club agreements might be unenfor ceable and that they mig

ht be entitled to a

refund or other

remedy. The

record on appeal does notconta in the letter , but there is no indication in the record that it was not sent. Even after such notification, the State

failed to produce even one consumer who wanted relief because Thompson didnot have a certif

icate of regist ration fo r a thre e-month p eriod. D espite this, the State continued to seek hundreds of thousands of dollars in restitution. Under these ci rcumstan ces, there is no “personwho has suffere d any ascert ainable loss” as s pecif

ied i n section 47-18-108(b)(1). Ac co rd in gl y, we must conclude that the trial cou rt did not err in dismissing the State’s claim for restitution relating to con sumers’ h ealth clu b agreements. The State also appeals the trial court ’ s ruling that only a c onsumer may pursue remedies under the Health Club Act, section 47-18-303 of the Tennessee Code Annotated. The Health Club Act provides that

where, as here, there hasbeen a violation of the provi sion requ

iring a certifi cate of reg istration , the hea

lth club a greem ent beco mes: . . . unenf orceab le aga

inst the buyer, a

nd the buy

er shall b e entitle d to a ref und less that portion of the total price which represents actual use of the facilities. . . . Tenn. Code Ann. § 47-18-3 03 (2001) . Thus, the Health Clu

b Act deta

ils r elief avai lable to the consumer, but does not mention whether the State may obtain relief on the consumer’s behalf under the Health Clu

b Act. The

Health Clu

b Act, how ever, includes a nother pr ovision sta

ting tha t a violation of the requireme nt that a health

club maintain a valid certificate of registration “constitutes a vio lation of the Tennessee Consumer Protection Act. . . .” Tenn. Code Ann. § 47-18- 320(a )

. Moreover, the Health Club Act specifies that such a violation of the registration requirements of the Health Clu

b Act, fo r the pur pose of a pply ing the C onsumer Pr

otection Act,

. . . shall be

construed to constitute

an unfai r or deceptive act or practice a ffecting the conduct of any tra

de or commerce and subject to the penalties and re medies as provided by t hat act. Tenn. Code Ann. § 47-1 8-320(b) ( 2001). Thus, the Health Club Act clearly states that such a violation of the Health Club Act is al so per se a viola tion of the

Consumer P

rotectio n Act. I

t is undisp uted, and the trial court noted, that the State may pursue remedies on behalf of con sumer s13 Section 4 7-18-10 8(a)(1) p rovides:
W henever the di visi on has rea son to bel ieve t hat any person has engaged i n . . . any act decl ared unlawful by this pa rt . . . the at torney general and reporte r . . . may bring an action i n the name of the state against such person to restrain by temporary restraini ng order, temporary inju ncti on , or perm anen t injunctio n the use of such act or p ractice

. Tenn. Cod e Ann. § 47-18-108 (a)(1) (2001).

14 Section 4 7-18-10 8(b)(1 ) provide s: The court may make such orders or render such judgments as may be necessary to restore to any person who has suffered any as certainable loss by reason of the use or employment of such unl awful method, act, or practi ce, any money or propert y, r eal, personal , or mix ed, or any other ar ticl e, com mod ity, or thi ng of val ue whe rever

si tuat ed, wh ich may ha ve been acqui red by means of an y act or p ractice decla red to be un lawful by th is part.
Te nn. Co de A nn. § 4 7-18 -108 (b)(1 ) (20 01)

. See also Tenn. Code Ann. § 47-18- 112 quote d in f ootnot e 11. 15 Sec tion 47 -18-3 13 p rovid es in pa rt: (a) Any indivi dual, fi rm, corporation, associati on, or other legal enti ty wh ich obtai ns an owne rship interest in a healt

h club or i ts ass ets shall b e resp onsib le for d eterm ining that su ch hea lth club is in com plianc e with the pro visions o f this part. (b) A health club s hall provide wri tten notic e to th e divi sion by regis tered or c erti fied mai l wit hin t en (con tinued ...) -10- under the Consumer

Protection Act. 13 The trial court held, however, that the State could not pursue remedies under the

Health Clu

b Act, onl y under the Consumer Protection Act. This cannot be true, since a violatio n of the H ealth Club Act is per se a violation of the Consumer Pro tection Act

. Moreover, the State is empowered to obtain a bro ad range of remedies unde r the Consumer Protection Act, 14 which wou ld include the remedie s specif ied in the Health Clu

b Act. The

refore , this holding by the trial c ourt must be reversed. Our holding on this issue , howeve r, does little to ass ist the Stat e inthis case. As noted above, the State soug

ht, and was granted, injunctive relief re quiring Thompson to notify consumers of the alleged violation and that legal relief from their health club a greem ents mi ght be available. The “other” relief sought by

the State, that

is, restitution, requiredthe State to show “ascertainable loss.” This would be the case under the Consumer P rotection Actor under the Health Club Act via the Consumer P

rotectio n Act, as outlined above. Thus, despite our holding that the State may pur sue remedies on behalf of consumers und er th e Health Club Act, the State has not proffered evidenc e to support the award of any further relief. The State next argues that the trial court erred i n failing to grant it summary judgment on several issues. The State a sserts t hat it was entitled to a judgment as a matter of law reg arding Thompson’s failure to ascertain whether the Club was in compliance with the Health Club Act and Thompson’s failure to notify the Division of Consumer Affairs of thechange in ownership, 15 as well15 (.. .cont inu ed) (10 ) days a fter any ch ange in own ership or the sa le of a he alth club or an y of its loca tions. . . . Tenn. Cod e Ann. § 47-18-313 (a) and (b) (2001).

16 Under section 47-18-311 (b): Upon a change in the infor matio n con tained in the orig inal appli cati on for

a cer ti fi cate of r egis tra ti on or in the mo st curre nt app lication fo r rene wal ther eof, wh ich reflec ts a chan ge of o wners hip of more than for ty -ni ne per cent (49%) of a

heal th c lub or

any of it s l ocati ons, a new c ert if icate of r egis tra ti on shall be app lied for and o btained p rior to com mencing o r continuing business. Tenn. Cod e Ann. § 47-18-311 (b) (2001). -11- as Thompson’ failure

to obtain a

new cer tificate upon tran sfer of

ownersh ip pursuant to section 47- 18-311(b) 16 of the Tennessee Code Annotated. I t is undisputed that Thompson violated the Act by failing to have a valid certificate of reg istration for a three-month period. The errors a lleged by the Stateon the additional issues would be harmless error; reversal of the trial court holding would not entitle the State to

any additiona l relief . Therefore, w e find thisargume nt to be wit

hout merit

. The State also

asserts t hat the tr ial judg e erre d in failing to gr ant su mm ar y judgment regarding violations of section 47-18-104(b)(12) of the Consumer Protection Act. The record indicates that this motion was denied because genuine issues of mate rial fact remained. The issue went to trial, a nd the tria

l court g rante d Thomp son’s motio n for dir ected ve rdict. Th erefor e, this argume nt is also w ithout mer

it. Fi na ll y, the State

assertsthat the trial court erred in awarding T hompson attorney’sfees and costs under the

Equal Ac cess to Justice Act of 1984, sections 29-37-101 to -106 of the Tennessee Code Annotated. Th

e Equal Access to

Justice Ac t provide s: (a) (1) Unless otherwise provided by law, the court having jurisdiction over the civil action brought by a

state agency

or over an action f

or judicial review brought pursuant to § 4-5-322, may a

wardreasonable and actual fees a nd other expenses not to exceed ten thousand dollars ($10,000) to the prevailing party unless the prevailing party is a state a

gency .

. . . . (b) (1) The court may make an award pursuant to the terms of this chapter only if the smallbusiness has demonstrated by a preponderance

of the evidence that the actions of the state agency were not supported by

substantial evidence or were arbitrary and capricious or were brought in bad faith for the pur pose of ha ra ss me nt . T he co ur t m ay, in its discretion, decline to make an award if it finds tha

t specia l circums tances e

xist that would make an award unjust. . . .-12-

Tenn. Code Ann. § 29-37-104 (a) and (b) (2000). The State a rgues that the Thompson is not the prevailing party , that the

State of Tennessee is not a “ state agency” as defined by

the Equa l Access to Justice Act of 1984, and that the terms “substantial evidence” and “arbitrary and capricious” are inapplicable to the case at bar. The State fir st assert s that Thom pson is no t the prevailing party because Thompson was assessedfines due to the period of nonregistration. As the trial cour t indicated, most of the litigation exp en se was incurred as a result of the State’s dog ged pursuit of restitution, which occurred afte r Thompson admitted that it did not have a valid certificate of registration for a three-month period. The State’s pursuit of

restitution continued despite the fact that not a single consumer who desired restitution w as produc ed. We do n ot find und er these circumst ances th at the tri al court

erred in holding that Thompson was the prevailing party

. The State next claims that the State of Tennessee is not a “ state agen cy” a s defined by the Equal Access to Justice Act of 1984. By statute, a “s ta te ag en cy” is defined as: “each state board, commission, committee, department, officer, or any other unit of state government authorized or required by a ny s tatute or constitutional provision to make rules or to determine contested cases.” Tenn. Code Ann. § 4-5-102(2) (1998). The lawsuit against Thompson was pursued by the Attorney General at the be

hest of the Depar

tment of Co mmerce a

nd In surance . Thus, it f

alls within the Equal Accessto Justice Act. The St at e a ss er ts fu rt he r t ha t t he tr ia l c ou rt er re d i n a pp ar en tl y c onclu ding that the State’s actions against Thompson were “arbitrary and capricious” and not supported by “substantial evidence.” Under the circumstances of this case, we find

no error in this conclusion. Therefore, the award of attorney ’s fees and costs to Thompson is affirmed. The decision

of the tri al court

is affir med in part and rever sed in part, as set forth above. Costs are taxed one-half t o appella nt, State of Tennessee, and one-half to the app ellees, Travis Thompson, individua

lly a nd doing business as Thompson Enterprises, LL C and Gold’s Gym, and Thompson Enter prise s, LLC, a De laware Limite d Liabil ity Comp any, doin g b usiness as Gold’s Gym , fo r w hi ch ex ec ut io n m ay i ss ue , i f n ec es sa ry.

___________________________________ HOLL Y KIRBY L

IL LARD, JUDGE