Court Opinion

ID: 1067087
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:25:17.192491+00
Date Added: 2024-06-11T12:24:14.000282
License: Public Domain

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

  STATE OF TENNESSEE V. TRAVIS THOMPSON, INDIVIDUALLY AND
  DOING BUSINESS AS THOMPSON ENTERPRISES, LLC AND GOLD’S GYM, AND
   THOMPSON ENTERPRISES, LLC, A DELAWARE LIMITED LIABILITY
                              COMPANY,
                     DOING BUSINESS AS GOLD’S GYM

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

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

This case involves the Tennessee Health Club Act. The defendant/appellees purchased a health club
and failed to obtain a certificate of registration. Three months later, the health club owners obtained
a certificate of registration. The State of Tennessee, through the Attorney General, filed a lawsuit
against the health club owners alleging violations of the Tennessee Consumer Protection Act and
the Health Club Act seeking injunctive relief, substantial fines, and several hundred thousand dollars
in restitution. The trial court granted partial summary judgment 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 “ascertainable loss” under the Tennessee Consumer Protection Act. The
trial court also granted the health club owners’ request for attorney’s fees and costs. The State
appeals. We affirm in part and reverse in part, 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; Judgment of the Chancery Court is Reversed in
                                Part and Affirmed in Part

HOLLY KIRBY LILLARD, J., delivered the opinion of the court, in which ALAN E. HIGHERS, J., and
DAVID R. FARMER , J., joined.

Paul G. Summers, Attorney General and Reporter; Timothy C. Phillips, Assistant Attorney General;
and Dana M. Ausbrooks, Assistant Attorney General, Nashville, Tennessee, for appellants, State of
Tennessee.

William B. Jakes, III, for appellees Travis Thompson, Individually and doing business as Thompson
Enterprises, LLC and Gold’s Gym, and Thompson Enterprises, LLC, a Delaware Limited Liability
Company, doing business as Gold’s Gym.
                                                        OPINION

       Defendant/Appellee Travis Thompson purchased a Gold’s Gym (“Club”) in Antioch,
Tennessee on March 1, 1999 and began operating the gym on April 16, 1999. At the time of the
purchase, the Club had approximately 600 to 700 members, and was adding approximately twenty-
five members each month. In addition, Thompson, under the name of Thompson Enterprises, LLC,1
purchased at least 2000 membership agreements from another local health club. Defendant/Appellee
Thompson Enterprises, LLC (Travis Thompson and Thompson Enterprises, LLC, 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 mandated
by section 47-18-302,3 the provision of the Tennessee Code Annotated that regulates health clubs,
sometimes referred to as the Health Club Act.4 Thompson was unaware of his responsibility to
obtain a certificate of registration for the Club. Appellant/State of Tennessee (“State”) alleged that
it contacted Thompson by mail and telephone numerous times during April and May 1999 regarding
the lack of a certificate of registration.5 Thompson applied for a certificate of registration on June
22, 1999, and it was issued on July 1, 1999. Thus, Thompson had operated Gold’s Gym for a period
of approximately three months without a valid certificate of registration.

        On July 16, 1999, the Attorney General, on behalf of the State’s Division of Consumer
Affairs of the Department of Commerce and Insurance, filed a lawsuit against Thompson and
Thompson Enterprises alleging violation of the Health Club Act,6 and the Tennessee Consumer
Protection Act (“Consumer Protection Act”).7 The State requested, inter alia, that:

         . . . [T]his Court make such orders or render such judgments as may be necessary to
         restore to any consumer or other person any ascertainable losses suffered by reason

         1
         Thomp son E nterprises, LLC is co mprised of Tho mpson and various memb ers of his family. It appears that
Thompson purchased the additional membe rships in his name, do ing business as T homp son Enterprises, LLC, but that
Thomp son E nterprises, LLC was not actually form ed until June 24, 19 99.

         2
          Thompson and T hom pson Enterprise s, LLC will be co llectively referred to as “Thomp son,” except where the
sentence indicates a reference to T hom pson individ ually.

         3
           Section 47-18-302 of the Tennessee Code Annotated states in part: “(a) It is unlawful to operate a health club
unless a valid certificate of registration is obtained for each location where health club services or facilities are provided
and payment of the fee required for such registration is made. . . .” Tenn. Code Ann. § 47-18 -302(a) (2001).

         4
             Tenn. Cod e Ann. §§ 47-18-30 1 to -320 (2001 ).

         5
             Thompson argued that the first attempt the State made to contact the Club 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-
         of the alleged violations of the Tennessee Consumer Protection Act, including but
         not limited to requiring that Defendants notify in writing each and every consumer
         that entered into a health club agreement with Defendants while Defendants were not
         registered or the health club’s registration had lapsed, or were purchased by
         Defendants from an unregistered health club or purchased by Defendants while
         unregistered, that the agreement is unenforceable against the consumer and the
         consumer is entitled 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
         consumer as provided 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 amended its complaint to include an additional

         8
             Section 47-18-30 3 of the T ennessee C ode A nnotated states:

         A health club agreement shall be unenforceable against the buyer, and the buye r shall be entitled to
         a refund less that portion of the total price which represents actual use of the facilities and less the cost
         of goods and se rvices consumed by the b uyer if:
           ....

          (2) The health club fails to ob tain or fails to maintain a certificate of registration as required by this
         part; . . .

Tenn. Co de A nn. § 4 7-18 -303 (2001).

         9
             Section 47-18-10 8(b) of the Tennessee Code Annotated provides:

         (b) (1) The court may make such o rders or ren der such jud gments as ma y be necessary to resto re to
         any person who has suffered any ascertainable loss by reason of the use or employm ent of such
         unlawful metho d, act, o r prac tice, any m oney or prope rty, real, persona l, or mixed, or any other article,
         com mod ity, or thing of value wherever situated, which may have been acquired by means of any act
         or practice declared to be unlawful by this part.

           (2) The court may also enter an order temporarily or p erma nently revoking a license or certificate
         authorizing that person to engage in business in this state, if evidence has been presented to the court
         establishing kno wing and persistent violations o f this part.

          (3) The court may also order payment to the state of a civil penalty of not more than one thousand
         dollars ($1 ,000 ) for each violation.

           (4) The court may also order reim burse ment to the state for the reasonable costs and expenses of
         investigation and prosecution o f actions under this part, including attorneys’ fees.

Tenn. Co de A nn. § 4 7-18 -108 (b) (2 001 ).

                                                              -3-
request:

        That the court order that Defendants notify each and every consumer that entered into
        a health club agreement with Defendants while Defendants were not registered or the
        health club’s registration had lapsed, or were purchased by Defendants from an
        unregistered health club or purchased by Defendants while unregistered, that the
        agreement is unenforceable against the consumer and the consumer is entitled 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 consumer as provided in
        [section 47-18-303 of the Tennessee Code Annotated] plus statutory interest.

The Answer filed by Thompson included a defense of selective prosecution.

        The State sought a temporary injunction, seeking to require Thompson to notify all members
that their agreements were unenforceable during the period of time in which the Club had no
certificate of registration, and informing them of various remedies, including refunds and restitution.
The trial court granted the injunction, requiring Thompson to send letters to consumers who entered
into an agreement with Gold’s Gym during the pertinent time frames. Each letter was 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 myriad of motions and cross motions. As a result of these
motions, the trial court held, inter alia, that Thompson had violated the Health Club Act and
consequently also violated the Consumer Protection Act.10 In deciding the State’s first motion for
partial summary judgment, the trial court determined that the remedies in the Consumer Protection
Act were not exclusive, and that the State was permitted to pursue the remedies available 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
the Consumer Protection Act available upon a violation of the Health Club Act, and the remedies
available under the Consumer Protection Act are not the exclusive remedies available to the State.

        10
             Section 47-18-32 0 of the T ennessee C ode A nnotated states:

        (a) A violation of this part constitutes a violation of the Tennessee C onsumer P rotection Act,
        com piled in part 1 of this chapter.

        (b) For the purpose of ap plicatio n of the T ennessee C onsumer P rotection Act, any violation of the
        provisions of this part shall be construed to constitute an unfair or deceptive act or practice affecting
        the conduct of any trade or commerce and subject to the penalties and remedies as provided by that
        act.

Tenn. Code Ann. § 47-18-320 (2001). Thus, a violation of the Health Club Act’s requirement for a certificate of
registration is per se a violation of the Consumer Protection Act as well.

                                                           -4-
See Tenn. Code Ann. § 47-18-112.11 Thus, the remedies listed in the Health Club Act, section 47-
18-303, would also be available to the State. In its order on the State’s second motion for partial
summary judgment, however, the trial court held that the State was limited to the remedies in the
Consumer Protection Act. The trial court stated:

         [Section 47-18-303(2) of the Health Club Act] provides that the conduct of the
         defendants in not obtaining registration causes a buyer’s contract to be unenforceable
         against the buyer, and the buyer is entitled 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 could use section 47-18-
         303 as a remedy provision against a health club, the Court determines that the
         plaintiff, State of Tennessee is required to pursue its remedies as to vindicating
         consumers as provided for in [section 47-18-108(b)(1)] of the Tennessee Consumer
         Protection Act.

Hence, the trial court ultimately determined that the State may not pursue a remedy through the
Health Club Act, section 47-18-303, but rather through the Consumer Protection Act, section 47-18-
108. The trial court dismissed the State’s request that Thompson be required to pay restitution to
consumers under section 47-18-104, finding that the State had not proffered evidence of any
“ascertainable loss” by a consumer as required by the Consumer Protection 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 certification 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) whether the acts were unfair or
deceptive to consumers, under section 47-18-104(b)(27), of the Consumer Protection Act.

         During discovery, Thompson sent interrogatories to the State, asking the State to detail the
relief it sought. After discovery skirmishes, the State 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 February 5, 2001. At the hearing, the State called Thompson
and Kenneth Wright, a former general manager of the Club. The State also called Ray Palumbo
(“Palumbo”), a former member of Powerhouse Gym, whose contract was among those purchased
by Thompson. Palumbo cancelled his contract with Powerhouse, but even after he cancelled,

         11
           Section 47-18-112 o f the Tennessee Code Anno tated states: “The powers and remedies provided in this part
shall be cumulative and supplementary to all other powers and remedies otherwise provided by law. The invocation of
one power or remedy herein shall not be construed as excluding or prohibiting the use of any other a vailable remedy.”
Tenn. Cod e Ann. § 47-18-112 (2001).

                                                         -5-
Thompson continued efforts to collect on Palumbo’s account. The State identified no consumers
seeking relief because of the Club’s lack of a valid certificate of registration.

        At the end of the State’s proof, Thompson’s counsel moved for a directed verdict, 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 certificate of registration, and no proof of
continuing harm, which would be necessary to justify the injunctive relief the State requested in its
complaint.12 The trial court granted Thompson’s motion for directed verdict. Since the trial court
had determined prior to trial that Thompson’s failure to register the Club was per se a violation of
the Consumer Protection Act, the trial court fined Travis Thompson individually and Thompson
Enterprises $1,000 each. Finally, the trial court agreed to hear the State’s request for costs, expenses,
and attorney’s fees, but limited the request to the period of time prior to the filing of the lawsuit.

         After a subsequent hearing, the trial court ordered that Thompson pay the State fees and
expenses incurred before the lawsuit was filed, which amounted to $1,490.40. The trial court also,
however, ordered that the State pay Thompson $10,000 in attorney’s fees pursuant to the Equal
Access to Justice Act of 1984, sections 29-37-101 to -106 of the Tennessee Code Annotated. The
trial court reasoned that the State’s failure to produce a single health club member with any
ascertainable loss to support a claim for restitution, and the State’s failure to even attempt to locate
such a person until three weeks before the trial, rendered the State’s “claim against the defendants
for restitution for ascertainable loss to consumers” unsupported by substantial evidence. In the trial
court’s oral ruling awarding attorney’s fees and costs to Thompson, the trial judge stated:

         . . . . The defendants have never disputed that for three months they were not 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
         defendants’ noncompliance, the State reasonably expended resources prior to the date
         the defendants became registered (July 2, 1999) to investigate the defendants’
         violation and obtain the defendants’ compliance. For this reason the Court awards
         the State its attorneys fees and costs incurred prior to filing the lawsuit in the above-
         captioned matter for the efforts expended in bringing the defendants into compliance.

                 But once the defendants came into compliance, the State continued to pursue
         this matter by filing 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 the lawsuit was filed 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

         12
           The State, in its complaint, requested injunctive relief to enjoin Thompson from engaging in acts and practices
that the State allege d violated the Health Club Ac t and the Consumer Protection Act, such as representing that the
agree ments in question were enfo rceab le.

                                                           -6-
       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, LLC for being unregistered by the State for three
       months. As to the claim for restitution, the Court dismissed that cause of action on
       summary judgment 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 discovery and motions had been pursued to defend against the restitution
       claims.

               Plaintiff’s counsel has admitted to the Court (in a hearing on February 2,
       2001) that from the day the lawsuit was filed not a single consumer had ever
       complained or alleged ascertainable loss due to the defendants’ brief period of not
       being registered. The plaintiff also stated that it had not made any effort to locate
       witnesses to support the restitution claims until three weeks before the trial. The
       Court concludes that the plaintiff’s claim against the defendants for restitution for
       ascertainable loss to consumers was unsupported by substantial evidence.

              Fees incurred by the defendants easily exceed the maximum recovery of
        $10,000.00 authorized by Tennessee Code Annotated section 29-37-104.

                The record also establishes that the defendants made an offer of judgment 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 they had admitted liability from the beginning. The
        judgment finally obtained in this matter was not more favorable than the offer of
        judgment. Costs of $848.00 for depositions and a court reporter fee were incurred
        by the defendants in this matter.

Thus, the trial court awarded the State a minimal amount of fees and costs, while awarding
Thompson the maximum amount of attorney’s fees available under the Equal Access to Justice Act,
as well as costs. The State now appeals.

        On appeal, the State argues that the trial court erred in holding that the remedies available
to the State under the Health Club Act are limited to the remedies provided in the Consumer
Protection Act; that the trial court erred in holding that consumers did not suffer an ascertainable loss
as contemplated in the Consumer Protection Act, section 47-18-104(b)(2); that the trial court erred
in denying the State’s motion for partial summary judgment on several issues; that the trial court
erred in granting Thompson’s motion for directed verdict; and finally, that the trial court erred in
awarding attorney’s fees to Thompson under the Equal Access to Justice Act of 1984.

                                                  -7-
        As to the State’s issue on appeal regarding Thompson’s motion for partial summary
judgment, a motion for summary judgment should be granted when the movant demonstrates that
there are no genuine issues of material fact and that the moving party is entitled to a judgment as a
matter of law. Tenn. R. Civ. P. 56.04. The party moving for summary judgment bears the burden
of demonstrating that no genuine issue of material fact exists. Bain v. Wells, 936 S.W.2d 618, 622
(Tenn. 1997). On a motion for summary judgment, the court must take the strongest legitimate view
of the evidence in favor of the nonmoving party, allow all reasonable inferences in favor of that
party, and discard all countervailing evidence. Id. Summary judgment is only appropriate when the
facts and the legal conclusions drawn from the facts reasonably permit only one conclusion. Carvell
v. Bottoms, 900 S.W.2d 23, 26 (Tenn. 1995). Since only questions of law are involved, there is no
presumption of correctness regarding a trial court’s grant of summary judgment. Bain, 936 S.W.2d
at 622. Therefore, our review of the trial court’s grant of summary judgment is de novo on the record
before this Court. Warren v. Estate of Kirk, 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 Bear White Eagle, 63 S.W.3d 734, 754 (Tenn. Ct. App. 2001) (citations
omitted), and it is our role to “ascertain and give effect to the intention and purpose of the
legislature.” Gleaves v. Checker Cab Transit Corp., 15 S.W.3d 799, 802 (Tenn. 2000) (quoting
Carson Creek Vacation Resorts, Inc. v. State Dep’t of Revenue, 865 S.W.2d 1, 2 (Tenn. 1993)).

        We address first the State’s argument that the trial court erred in holding that the State was
not entitled to relief under the Consumer Protection Act because it failed to produce evidence that
a consumer had sustained an “ascertainable loss” stemming from the Club’s failure to have a
certificate of registration for a three-month period. This holding was based on a provision in the
Consumer Protection Act, section 47-18-108(b)(1) of the Tennessee Code Annotated. The statute
provides:

       The court may make such orders or render such judgments as may be necessary to
       restore to any person who has suffered any ascertainable loss by reason of the use or
       employment of such unlawful method, act, or practice, any money or property, real,
       personal, or mixed, or any other article, commodity, or thing of value wherever
       situated, which may have been acquired by means of any act or practice declared to
       be unlawful by this part.

Tenn. Code Ann. § 47-18-108(b)(1) (2001) (emphasis added). In 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 inform the consumer that
       the health club is not licensed. Specifically, the State acknowledges in its response
       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

                                                 -8-
       plaintiff knows entered into agreements with the defendants because of the
       representation that Gold’s Gym was duly registered with the State. . . .

Thus, the trial court dismissed the State’s claim for restitution under the Consumer Protection Act
because the State could not identify an ascertainable loss.

       On appeal, the State asserts that it was not required to produce a consumer because actual
deception need not be proven. The State also argues that consumers suffered an ascertainable loss
because they were unable to cancel their health club contracts.

         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
unenforceable and that they might be entitled to a refund or other remedy. The record on appeal does
not contain 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
did not have a certificate of registration for a three-month period. Despite this, the State continued
to seek hundreds of thousands of dollars in restitution. Under these circumstances, there is no
“person who has suffered any ascertainable loss” as specified in section 47-18-108(b)(1).
Accordingly, we must conclude that the trial court did not err in dismissing the State’s claim for
restitution relating to consumers’ health club agreements.

        The State also appeals the trial court’s ruling that only a consumer 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 has been a violation of the provision requiring a certificate
of registration, the health club agreement becomes:

        . . . unenforceable against the buyer, and the buyer shall be entitled to a refund less
        that portion of the total price which represents actual use of the facilities. . . .

Tenn. Code Ann. § 47-18-303 (2001). Thus, the Health Club Act details relief available to the
consumer, but does not mention whether the State may obtain relief on the consumer’s behalf under
the Health Club Act. The Health Club Act, however, includes another provision stating that a
violation of the requirement that a health club maintain a valid certificate of registration “constitutes
a violation 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 Club Act, for the purpose of applying the Consumer Protection Act,

        . . . shall be construed to constitute an unfair or deceptive act or practice affecting the
        conduct of any trade or commerce and subject to the penalties and remedies as
        provided by that act.

Tenn. Code Ann. § 47-18-320(b) (2001). Thus, the Health Club Act clearly states that such a
violation of the Health Club Act is also per se a violation of the Consumer Protection Act. It is
undisputed, and the trial court noted, that the State may pursue remedies on behalf of consumers

                                                   -9-
under the Consumer Protection Act.13 The trial court held, however, that the State could not pursue
remedies under the Health Club Act, only under the Consumer Protection Act. This cannot be true,
since a violation of the Health Club Act is per se a violation of the Consumer Protection Act.
Moreover, the State is empowered to obtain a broad range of remedies under the Consumer
Protection Act,14 which would include the remedies specified in the Health Club Act. Therefore, this
holding by the trial court must be reversed.

        Our holding on this issue, however, does little to assist the State in this case. As noted above,
the State sought, and was granted, injunctive relief requiring Thompson to notify consumers of the
alleged violation and that legal relief from their health club agreements might be available. The
“other” relief sought by the State, that is, restitution, required the State to show “ascertainable loss.”
This would be the case under the Consumer Protection Act or under the Health Club Act via the
Consumer Protection Act, as outlined above. Thus, despite our holding that the State may pursue
remedies on behalf of consumers under the Health Club Act, the State has not proffered evidence
to support the award of any further relief.

        The State next argues that the trial court erred in failing to grant it summary judgment on
several issues. The State asserts that it was entitled to a judgment as a matter of law regarding
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 the change in ownership,15 as well

        13
             Section 47-18-10 8(a)(1) p rovides:

        W henever the division has reason to believe that any person has engaged in . . . any act declared
        unlawful by this pa rt . . . the attorney general and reporter . . . may bring an action in the name of the
        state against such person to restrain by temporary restraining order, temporary injunction, or
        perm anent injunctio n the use of such act or p ractice.

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

        14
             Section 47-18-10 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 ascertainable loss by reason of the use or employment of such unlawful
        method, act, or practice, any money or property, real, personal, or mixed, or any other article,
        com mod ity, or thing of value wherever situated, which may have been acquired by means of any act
        or practice declared to be unlawful by this part.

Tenn. Co de A nn. § 4 7-18 -108 (b)(1 ) (2001). See also Tenn. Code Ann. § 47-18-112 quoted in footnote 11.

         15
              Section 47 -18-3 13 p rovid es in part:

         (a) Any individual, firm, corporation, association, or other legal entity which obtains an owne rship
         interest in a health club or its assets shall be responsible for determining that such hea lth club is in
         com pliance with the provisions o f this part.

         (b) A health club shall provide written notice to the division by registered or certified mail within ten
                                                                                                             (continued...)

                                                           -10-
as Thompson’ failure to obtain a new certificate upon transfer of ownership pursuant to section 47-
18-311(b)16 of the Tennessee Code Annotated. It is undisputed that Thompson violated the Act by
failing to have a valid certificate of registration for a three-month period. The errors alleged by the
State on the additional issues would be harmless error; reversal of the trial court holding would not
entitle the State to any additional relief. Therefore, we find this argument to be without merit.

        The State also asserts that the trial judge erred in failing to grant summary 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 material fact remained. The issue
went to trial, and the trial court granted Thompson’s motion for directed verdict. Therefore, this
argument is also without merit.

       Finally, the State asserts that the trial court erred in awarding Thompson attorney’s fees and
costs under the Equal Access to Justice Act of 1984, sections 29-37-101 to -106 of the Tennessee
Code Annotated. The Equal Access to Justice Act provides:

        (a) (1) Unless otherwise provided by law, the court having jurisdiction over the civil
        action brought by a state agency or over an action for judicial review brought
        pursuant to § 4-5-322, may award reasonable and actual fees and other expenses not
        to exceed ten thousand dollars ($10,000) to the prevailing party unless the prevailing
        party is a state agency.

        ....

        (b) (1) The court may make an award pursuant to the terms of this chapter only if the
        small business 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 purpose of harassment. The court may,
        in its discretion, decline to make an award if it finds that special circumstances exist
        that would make an award unjust. . . .

        15
          (...continued)
        (10) days after any change in ownership or the sa le of a he alth club or any of its locations. . . .

Tenn. Cod e Ann. § 47-18-313 (a) and (b) (2001).

        16
             Under section 47-18-311 (b):

        Upon a change in the information contained in the original application for a certificate of registration
        or in the mo st current app lication fo r renewal thereof, which reflects a chan ge of o wnership of more
        than forty-nine percent (49%) of a health club or any of its locations, a new certificate of registration
        shall be app lied for and obtained prior to com mencing o r continuing business.

Tenn. Cod e Ann. § 47-18-311 (b) (2001).

                                                          -11-
Tenn. Code Ann. § 29-37-104 (a) and (b) (2000). The State argues that the Thompson is not the
prevailing party, that the State of Tennessee is not a “state agency” as defined by the Equal 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 first asserts that Thompson is not the prevailing party because Thompson was
assessed fines due to the period of nonregistration. As the trial court indicated, most of the litigation
expense was incurred as a result of the State’s dogged pursuit of restitution, which occurred after
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 was produced. We do not find under these circumstances that the trial court erred in
holding that Thompson was the prevailing party.

       The State next claims that the State of Tennessee is not a “state agency” as defined by the
Equal Access to Justice Act of 1984. By statute, a “state agency” is defined as: “each state board,
commission, committee, department, officer, or any other unit of state government authorized or
required by any statute 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 behest of the Department of Commerce and Insurance. Thus, it falls within the Equal
Access to Justice Act.

       The State asserts further that the trial court erred in apparently concluding 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 trial court is affirmed in part and reversed in part, as set forth above.
Costs are taxed one-half to appellant, State of Tennessee, and one-half to the appellees, Travis
Thompson, individually and doing business as Thompson Enterprises, LLC and Gold’s Gym, and
Thompson Enterprises, LLC, a Delaware Limited Liability Company, doing business as Gold’s Gym,
for which execution may issue, if necessary.

                                                         ___________________________________
                                                         HOLLY KIRBY LILLARD, JUDGE

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