State Ex Rel. Babbitt v. Goodyear Tire & Rubber Co.

Citations: 626 P.2d 1115; 128 Ariz. 483; 1981 Ariz. App. LEXIS 380Docket: 1 CA-CIV 4747

Court: Court of Appeals of Arizona; February 17, 1981; Arizona; State Appellate Court

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The case involves the State of Arizona, represented by Attorney General Bruce E. Babbitt, against The Goodyear Tire & Rubber Company regarding alleged violations of the Arizona Consumer Fraud Act (A.R.S. 44-1522). The State claimed that Goodyear's advertising practices, specifically 'variable FET advertising' and the use of the term 'ply rating' without sufficient explanation, were deceptive. The superior court granted the State's motion for summary judgment, prohibiting Goodyear from continuing these practices.

Goodyear had advertised tires with a disclaimer about the federal excise tax (FET) that would be added based on tire size, and used 'ply rating' without adequate qualification. Upon learning of the impending lawsuit, Goodyear sought to delay litigation pending a Federal Trade Commission (FTC) review, which the State denied. Goodyear subsequently discontinued the challenged practices.

The State's complaint cited A.R.S. 44-1522(A), which prohibits deceptive acts in advertising regardless of actual consumer deception. The State's summary judgment motion referenced the advertisements and FTC guidelines indicating that taxes should be included in the price or closely associated with it.

On appeal, Goodyear raised three main issues: the necessity of proving deceptive intent for a Consumer Fraud Act violation, whether intent is required for A.R.S. 44-1522 violations, and the appropriateness of an injunction given Goodyear's cessation of the practices. Goodyear argued that there was insufficient evidence to prove that its advertising was deceptive, contending that the State was not entitled to summary judgment without such evidence.

The State and trial court relied heavily on Federal Trade Commission (FTC) guidelines, specifically 16 C.F.R. 228.15(g), regarding the Federal Excise Tax (FET) on tires, as informed by A.R.S. 44-1522(B). This guideline indicates that the FET should be included in the advertised tire price or clearly stated alongside it. The central legal question is whether the advertisement violates A.R.S. 44-1522, which prohibits deceptive acts or practices. The State claims deception arises from the failure to specify the exact FET, leading to potential consumer misunderstanding about the tire's price. However, upon review, the court finds no evidence of deception that would violate A.R.S. 44-1522, concluding that the trial court improperly granted an injunction against the advertisement.

Similarly, the court addresses the use of the term "ply rating" in truck tire advertisements, which the State argues may mislead consumers regarding the tire's strength and durability. The court notes that this issue is factual, yet since there is no evidence demonstrating consumer deception, the advertisement does not violate A.R.S. 44-1522 as a matter of law.

Goodyear contends that A.R.S. 44-1522 requires proof of intent to deceive, which the State failed to demonstrate. The court clarifies that the intent required is merely the intent to engage in the act of advertising, not a specific intent to deceive. Consequently, the submission of the advertisements fulfills this requirement. Finally, the court questions the appropriateness of an injunction since Goodyear had already voluntarily stopped the contested advertising practices.

Voluntary cessation of the challenged practices does not automatically render the request for an injunction moot, particularly if the cessation occurs after litigation has begun. Mootness in injunction cases arises only when it is evident that the wrongful behavior is unlikely to recur. Courts must evaluate factors indicating the probability of future violations, such as past infractions, cessation of those infractions, and ongoing disregard for the lawsuit. The plaintiff bears the burden of demonstrating the likelihood of future misconduct. The trial court failed to apply this standard in the current case, leading to a reversal and remand. Additionally, A.R.S. 44-1522 requires proof of intent regarding concealment or omission of material facts, stipulating that reliance on such actions by others must be shown in relation to the sale or advertisement of goods. The current status of the State's claims regarding these issues remains unclear.