Opinion ID: 1755829
Heading Depth: 1
Heading Rank: 3

Heading: mpa claim

Text: The trial court dismissed Hess' count claiming an MPA violation prior to trial. A motion to dismiss for failure to state a cause of action is solely a test of the adequacy of the plaintiff's petition. It assumes that all of plaintiff's averments are true, and liberally grants to plaintiff all reasonable inferences therefrom. Bosch v. St. Louis Healthcare Network, 41 S.W.3d 462, 464 (Mo. banc 2001). This Court reviews such a dismissal de novo. Adams v. Union Planters Bank, 201 S.W.3d 539, 541 (Mo.App. E.D.2006).
Section 407.020 has at all times proscribed deceptive or fraudulent acts in connection with the sale of merchandise, sec. 407.020, RSMo 2000, [6] which the MPA expressly defines to include real estate. Sec. 407.010(4) (merchandise includes any objects, wares, goods, commodities, intangibles, real estate, or services). At all relevant times, both the attorney general and private parties could sue a seller for alleged use of deceptive practices in the sale of goods and services. Sec. 407.100 (authorizing attorney general to bring enforcement actions); sec. 407.025 (authorizing private suits). Before 2000, though, only the attorney general could bring enforcement actions for deceptive practices in the sale of real estate. Sec. 407.025.1, RSMo 1994; Detling v. Edelbrock, 671 S.W.2d 265, 272-73 (Mo. banc 1984) (The legislature specifically excluded real estate transactions from the scope of the private right of action provision). In 2000, the private right of action permitted under the MPA was broadened to include all transactions in merchandise. Sec. 407.025.1. The parties agree that for real estate transactions since that time, private citizens injured by MPA violations have a right to act as private attorneys general for purposes of enforcing it. See Stiffelman v. Abrams, 655 S.W.2d 522, 530 (Mo. banc 1983) (noting that the `private attorney general' concept acknowledges that government cannot do everything and that some requirements of the Act can best be enforced by those most directly involved). In this case, the alleged violations occurred during Chase's sale of the property to Hess in 1999, prior to the 2000 amendment of the MPA. The parties disagree whether the 2000 amendment applies to Hess' MPA claim in these circumstances.
The Missouri Constitution prohibits laws that are retrospective in operation. Mo. Const. art. I, sec. 13. A law is retrospective in operation if it takes away or impairs vested or substantial rights acquired under existing laws or imposes new obligations, duties, or disabilities with respect to past transactions. Doe v. Roman Catholic Diocese of Jefferson City, 862 S.W.2d 338, 340 (Mo. banc 1993). Procedural and remedial statutes not affecting substantive rights, may be applied retrospectively, without violating the constitutional ban on retrospective laws. Mendelsohn v. State Bd. of Registration for the Healing Arts, 3 S.W.3d 783, 786 (Mo. banc 1999). Procedural law prescribes a method of enforcing rights or obtaining redress for their invasion; substantive law creates, defines and regulates rights. Wilkes v. Mo. Hwy. & Transp. Comm'n, 762 S.W.2d 27, 28 (Mo. banc 1988). The distinction is that `substantive law relates to the rights and duties giving rise to the cause of action, while procedural law is the machinery used for carrying on the suit.' State v. Jaco, 156 S.W.3d 775, 781 (Mo. banc 2005), quoting Wilkes, 762 S.W.2d at 28. Laws that provide for penalties where none existed before, however, are substantive and are always given only prospective application. See Yellow Freight Sys., Inc. v. Mayor's Comm'n on Human Rts., 791 S.W.2d 382, 387 (Mo. banc 1990). And, absent legislative intent to the contrary, [w]hen a statute is . . . remedial in one part while penal in another, it should be considered a remedial statute when enforcement of the remedy is sought and applied retrospectively, but considered penal when enforcement of the penalty is sought and applied prospectively. City of St. Louis v. Carpenter, 341 S.W.2d 786, 788 (Mo.1961). Chase insists that the 2000 amendment to the MPA created a new cause of action and it is unconstitutional to apply it retrospectively. A cause of action is a group of operative facts giving rise to one or more bases for suing. Chesterfield Village, Inc. v. City of Chesterfield, 64 S.W.3d 315, 318 (Mo. banc 2002). The operative facts that give rise to Chase's liability are the same both before and after the amendment: the use of a practice that MPA section 407.020 declares unlawful in the sale of real estate. [7] While under the amended statute the class of potential plaintiffs who can sue for violations of the MPA is broader than it was previously, the contours of the obligations imposed on sellers of real estate by section 407.020 are unchanged. Chase was always affirmatively obliged not to employ an unlawful practice under the MPA in its sale to Hess. Rather than imposing a new duty on Chase, the amendment as a whole merely substitute[s] a new or more appropriate remedy for the enforcement of an existing right. Pierce v. State, Dept. of Social Svcs., 969 S.W.2d 814, 823 (Mo.App. W.D. 1998). To the extent it simply prescribes a method of enforcing rights or obtaining redress for their invasion, Wilkes, 762 S.W.2d at 28, it is procedural and can be applied retrospectively. To the extent that it allows an entirely new type of disability, however, it may be considered substantive or penal in nature and must apply only prospectively. Each type of recovery permitted under the act must be analyzed separately. [8]
The MPA allows the attorney general to bring suit and seek restitution . . . as may be necessary to restore to any person who has suffered any ascertainable loss as a result of violation of the MPA in a real estate transaction. Sec. 407.100.4. Chase argues that these damages are different in kind than the actual damages that a private litigant may recover under the 2000 amendment. Restitution is merely a form of actual damage, however, and the MPA itself defines both restitution and actual damages in terms of ascertainable losses. Compare sec. 407.025.1 (allowing actual damages where plaintiff suffers an ascertainable loss of money or property), with sec. 407.100.4 (allowing restitution to restore to any person who has suffered any ascertainable loss). Even assuming for the sake of argument that the dollar amounts recoverable may vary under these two definitions in a particular factual situation, Chase cites no authority that a mere change in how actual damages are measured requires a statute to be applied prospectively only, when the nature of the wrong and the remedy are both remedial and similar in kind. In such a case, a mere change in how damages are measured is no different from a change in the language of how damages are computed under the applicable Missouri approved instructions. The nature of the duty and remedy are still the same. The actual damage remedy under the MPA applies retrospectively.
Hess is also entitled to seek recovery of his attorneys' fees. Indeed, recovery of attorneys' fees is nothing new under the MPA. Since 1985, the attorney general has been permitted to collect attorneys' fees under the MPA, just as prevailing private plaintiffs acting as private attorneys general in enforcing this and other remedial statutes are permitted to collect their attorneys' fees in bringing such actions. See sec. 407.130 (permitting the attorney general to recover as costs, in addition to normal court costs, the cost of the investigation and prosecution of any action to enforce the provisions of this chapter); sec. 407.025.1 (permitting the court to award to the prevailing party attorney's fees); White v. Mo. Veterinary Medical Bd., 906 S.W.2d 753, 756-57 (Mo.App. W.D.1995) (noting that, although the plaintiff was not able to collect fees, fee-shifting is often available where plaintiff acts as private attorney general). The 2000 amendment merely allowed private parties to sue for alleged MPA violations in all merchandise transactions, rather than just in regard to goods and services. As noted above, that did not impose a new obligation. Chase's contention that the statute authorizing the attorney general to collect, in addition to normal court costs, the cost of investigation and prosecution of any action, does not authorize the attorney general to collect attorneys' fees is plainly erroneous and previously has been rejected. See State ex rel. Webster v. Areaco Inv. Co., 756 S.W.2d 633, 635, 637 (Mo. App. E.D.1988) (section 407.130 clearly authorizes trial court to award attorney general attorney's fees in MPA case). While the fees of a private attorney general, such as Hess, may be greater or less than the costs of investigation and prosecution by the attorney general, that does not make this a substantive change in the statute requiring only prospective application. The argument that the right to recover attorneys' fees imposes a new disability under the 2000 amendments is without merit.
A different result obtains in regard to the right to bring a private right of action for punitive damages. The well-established purpose of punitive damages is to inflict punishment and to serve as an example and a deterrent to similar conduct. Call v. Heard, 925 S.W.2d 840, 849 (Mo. banc 1996). In light of Missouri's constitutional prohibition on retrospective laws, laws providing for penalties and forfeitures are always given only prospective application. Yellow Freight Sys., Inc., 791 S.W.2d at 387 (Mo. banc 1990). Chase argues that, under the pre-amendment statute, sellers of real estate could be obligated to recompense a private party for her injuries and the attorney general for his attorneys' fees, but they could not be assessed punitive damages. This Court agrees. Prior to the 2000 amendment, a person who violated the MPA in regard to a real estate transaction was subject to civil penalties of up to $1000 per violation and a small penalty of 10 percent or such other amount as may be agreed upon by the parties or ordered by the Court. See sec. 407.100.4; sec. 407.100.6; Sec. 407.140.3. While these sums are penal in nature, they are not similar in kind to the assessment of punitive damages. [P]unitive damages are extraordinary and harsh. Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104, 111 (Mo. banc 1996). The risk of imposition of punitive damages on a seller of real estate for an alleged violation of the MPA is a new disability that cannot be applied to causes of action that accrued before the effective date of the amendment. Just as State ex rel. Webster v. Cornelius, 729 S.W.2d 60, 66 (Mo.App. E.D.1987), held that the attorney general's right to recover attorneys' fees first allowed by the 1985 amendments could not be applied retrospectively because it attache[d] a new disability, id., so the private right to recover punitive damages for violations of the MPA in real estate transactions imposes a new disability and is applicable prospectively only.
The dissent heavily relies on the Eighth Circuit's decision in Owner-Operator Independent Drivers Ass'n, Inc. v. New Prime, Inc., 339 F.3d 1001, 1006-08 (8th Cir.2003). That decision is neither persuasive nor controlling. [9] This Court finds more persuasive the approach taken by Owner-Operator Independent Drivers Ass'n, Inc. v. Arctic Express, Inc., 270 F.Supp.2d 990, 995-97 (S.D.Ohio 2003), which distinguished the cases relied on in New Prime and concluded that the same amendments construed in that case could be applied retroactively under principles of federal statutory interpretation because they simply shifted the power to bring the Defendants into court from the [government agency] to the owner-operators themselves. Id. at 995. The reasoning of Arctic Express mirrors that of this Court today and is the proper result under Missouri's rules governing retroactive application of the laws. As this Court unanimously held in Wilkes v. Mo. Hwy & Transp. Comm'n, 762 S.W.2d 27, 28 (Mo. banc 1988), in giving retroactive effect to a 1986 amendment eliminating Missouri's absolute defense of sovereign immunity from certain tort claims, under Missouri principles of constitutional and statutory interpretation such a change is considered procedural, not substantive. Id. at 28. Such is the case in regard to the amendment to the MPA to permit a private party injured by defendant's wrong to sue directly for his damages rather than depend on the attorney general to seek restitution for such harm. An amendment to allow a direct action neither takes away vested rights nor imposes new obligations. The same cannot be said of the new provision for imposition of punitive damages, and for that reason the Court holds that such damages are available only prospectively. The cases cited by the dissent applying federal law interpreting different statutes do not require a contrary result.
The final issue is the nature and scope of remand on the MPA claim. Chase argues that if this Court finds that the trial court erred in dismissing Hess' MPA claim, it should remand for a new trial on both liability and damages. Hess argues that the elements necessary to prove his claim under the MPA are subsumed within the facts the jury necessarily found in his favor in finding for him on the fraud claim. Therefore, Hess contends the issue of liability is moot and this Court should remand with instructions to enter a directed verdict in his favor on the MPA claim and to hold a trial on his actual damages and attorneys' fees. [10] In order for liability to be moot on remand, it is essential that the jury at the first trial necessarily decide each and every fact essential to liability in their verdict. Dhyne, 188 S.W.3d at 456 (submissible case requires evidence of all facts essential to liability). Determining whether the jury found each and every fact essential to liability under the MPA claim in deciding the fraud claim in Hess' favor requires a comparison of the elements of the common law fraud claim submitted in the first trial, set out earlier, with the elements of Hess' MPA claim. Section 407.025 sets out the elements of a private right of action for MPA violations. It states in relevant part: Any person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by section 407.020, may bring a private civil action . . . Sec. 407.025.1. In this case, Hess must prove that he has: (1) purchased real estate; (2) for personal, family, or household purposes; and (3) suffered an ascertainable loss of money or property; (4) as a result of an act declared unlawful by section 407.020. Section 407.020 bars a variety of conduct, including concealment, suppression or omission of any material fact in connection with the sale of merchandise, which includes real estate. In finding for Hess on his fraud claim against Chase, the jury necessarily found that Hess satisfied the first and third elements just listed. In addition, reviewing the pertinent regulations the attorney general promulgated under the MPA, sec. 407.145, reveals that Hess' proof that Chase committed common law fraud was sufficient to prove the fourth element of Hess' MPA claim: that Chase engaged in unlawful conduct under the MPA when it concealed, suppressed or omitted a material fact in connection with the sale. Sec. 407.020.1. [11] MPA regulations define material fact, in pertinent part, as any fact which a reasonable consumer would likely consider to be important in making a purchasing decision . . .. 15 C.S.R. 60-9.010(1)(C). This definition of material is broader than the materiality requirement of common law fraud. See Carnahan v. American Family Mut. Ins. Co., 723 S.W.2d 612, 615 (Mo.App. E.D.1987) (holding that materiality for fraud purposes requires that the ultimate result would not have followed if there had been no representation). The regulations under the MPA further define omission of a material fact as any failure by a person to disclose material facts known to him/her, or upon reasonable inquiry would be known to him/her. 15 C.S.R. 60-9.110(3). Again, this imposes a broader duty on sellers than the common law imposes for fraud liability, as a fraud claim requires the seller to have actual knowledge of the material facts. See State ex rel. PaineWebber, Inc. v. Voorhees, 891 S.W.2d 126, 128 (Mo. banc 1995) (holding that speaker must have knowledge of its falsity or ignorance of its truth). Moreover, a fraud claim requires both proof of reliance and intent to induce reliance; the MPA claim expressly does not. Compare Voorhees, 891 S.W.2d at 128 (requiring intent to induce reliance, plaintiffs' reliance and right to rely to prove fraud) with 15 C.S.R. 60-9.110(4) (Reliance and intent that others rely upon such concealment, suppression or omission are not elements of concealment, suppression or omission as used in section 407.020.1). Proof of omission or concealment of a material fact under the MPA, therefore, plainly requires less proof than was required to prove the comparable elements of Hess' common law fraud claim. The jury's verdict in Hess' favor on the fraud claim establishes that Chase failed to disclose material facts for purposes of the MPA claim. There remains one element that was not submitted to the jury that Hess must prove to establish his MPA claim: that he purchased the real estate primarily for personal, family or household purposes. Sec. 407.025.1. Hess asserts that this element is uncontested, noting that uncontroverted trial testimony establishes that he built a home for his family on the property. Because the MPA claim had been dismissed prior to trial, and because the use for which Hess purchased the property was not necessary to prove his fraud claim, Chase had no reason to contest this issue. Chase states in this Court that it disputes the purpose for which the property was purchased and intends to contest the issue on remand. Because no record has been developed on the one unproven element, this Court cannot resolve whether any controverted facts preclude entry of judgment against Chase on Hess' MPA claim. On remand, following such discovery as may be appropriate on this issue, the trial court may determine whether this issue is truly controverted. If so, then Chase is entitled to a trial on its liability on Hess' MPA claim and on damages, though the parties are bound by law of the case on the three already proven issues. If not, then the parties are entitled to a trial on damages for the MPA violation. See Scott v. Blue Springs Ford Sales, Inc., 176 S.W.3d 140, 143 (Mo. banc 2005).