District Cablevision Limited Partnership v. Bassin
828 A.2d 714, 2003 D.C. App. LEXIS 471, 51 U.C.C. Rep. Serv. 2d (West) 149 (2003)
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Rule of Law:
The D.C. Consumer Protection Procedures Act (CPPA) allows consumers to sue for trade practices that violate common law, such as an invalid liquidated damages clause. Under the CPPA, treble damages are remedial and are awarded without requiring proof of egregious conduct or malice, and prejudgment interest on the net overcharge is calculated before trebling.
Facts:
- District Cablevision Limited Partnership (DCLP) provided cable television service to over 100,000 subscribers in the District of Columbia under a franchise.
- Subscribers entered into standardized contracts with DCLP under which they agreed to pay a monthly fee for service and a late charge if payments were overdue, in an amount to be set by DCLP.
- In 1990, DCLP unilaterally increased its late fee from $2.00 to $5.00, an amount equal to half the charge for basic cable service.
- DCLP's general manager acknowledged to the District’s Office of Cable Television that the $5.00 late fee was not cost-based but was designed simply to “motivate” subscribers to pay in a timely fashion.
- DCLP collected approximately $1.2 million annually from late fee payments, with about twenty-five percent of its subscribers incurring the $5.00 charge each month.
- DCLP's $5.00 late fee was significantly higher than the late fees typically charged by public utilities for gas, electric, and similar services.
- A jury later found that DCLP's actual costs attributable to late payment were only $2.43 per delinquent subscriber.
Procedural Posture:
- In November 1994, Robert Bassin and Sheri Weems filed a class action lawsuit in the Superior Court of the District of Columbia (trial court) on behalf of all subscribers who had paid DCLP’s $5.00 late fee.
- Plaintiffs challenged DCLP’s late fee practices as predatory, violating the District of Columbia Consumer Protection Procedures Act (CPPA) and common law requirements for a valid liquidated damages provision.
- The trial court ruled that the plaintiffs' causes of action were governed by a three-year statute of limitations, rather than a four-year statute as proposed by the plaintiffs.
- After a jury trial, the jury found that DCLP’s $5.00 late fee was not a valid liquidated damages provision and that DCLP’s actual costs attributable to late payment were $2.43 per delinquent subscriber, resulting in a compensatory damages award of $3,414,411.00.
- The jury further found that DCLP had acted maliciously or outrageously, and in a second phase of the trial, awarded an additional $3,274,080.00 in punitive damages, rejecting the option of treble damages.
- In deciding post-trial motions, the trial court upheld the plaintiffs’ cause of action under the CPPA and the jury’s compensatory damage award.
- The trial court, however, ruled that the evidence was insufficient to support punitive damages, setting aside the jury’s punitive damages award.
- The trial court also ruled that DCLP was entitled to recoup its actual damages ($2.43 per late payment) and that the plaintiffs were not entitled to prejudgment interest on their award.
- The trial court awarded the plaintiffs $425,916.25 in attorneys’ fees.
- Both the plaintiffs and DCLP appealed the trial court’s rulings to the District of Columbia Court of Appeals.
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Issue:
Does a cable television provider's imposition of an excessive late fee, which constitutes an invalid liquidated damages clause under common law, trigger liability under the D.C. Consumer Protection Procedures Act (CPPA), entitling consumers to treble damages without proof of malice and prejudgment interest on the net overcharge?
Opinions:
Majority - Glickman, Associate J.
Yes, a cable television provider's imposition of an excessive late fee that constitutes an invalid liquidated damages clause under common law does trigger liability under the D.C. Consumer Protection Procedures Act (CPPA), entitling consumers to treble damages without proof of malice and prejudgment interest on the net overcharge. First, the court affirmed that DCLP’s imposition of an invalid late fee, which violated common law requirements for a valid liquidated damages clause, was actionable under the CPPA. The CPPA is a comprehensive statute intended to remedy “all improper trade practices,” including those that violate the “rule of common law.” (D.C.Code § 28-3905(b)(2)). Common law scrutinizes liquidated damages clauses, particularly in adhesive consumer contracts with unequal bargaining power, deeming them void as a penalty if disproportionate to reasonably foreseeable damages at contract formation or designed to make default more profitable than performance. The jury's finding that the $5.00 fee was arbitrary, excessive, and designed for profit from defaults was binding and supported by evidence. Second, the court held that the plaintiff class was entitled to treble damages, but not punitive damages. Punitive damages require proof of egregious conduct and malice by clear and convincing evidence (e.g., Jonathan Woodner Co. v. Breeden, 665 A.2d 929 (D.C.1995)), which DCLP's conduct did not meet. Treble damages under the CPPA, however, serve a remedial purpose—encouraging private enforcement and ensuring full compensation—rather than a punitive one, as indicated by the statute's language (D.C.Code § 28-3905(k)(l)) and legislative history. Therefore, treble damages are awarded once “any damage” is established, without requiring additional findings of malice. Third, regarding the computation of damages, the court affirmed the trial court's application of the three-year statute of limitations (D.C.Code § 12-301(8)). This was because the plaintiffs' claim sought to invalidate the charge and recover sums paid, rather than to sue for a “breach of contract” as defined (e.g., Fowler v. A & A Co., 262 A.2d 344 (D.C.1970)), which would have triggered the U.C.C.’s four-year period. Fourth, the court affirmed DCLP's right to “recoup” its actual damages. Invalidation of an exorbitant liquidated damages provision does not preclude the non-breaching party from proving and recovering its actual damages (e.g., Lake River Corp. v. Carborundum Co., 769 F.2d 1284 (7th Cir.1985)). Consequently, the net overpayment, not the gross late fees, formed the basis for trebling. Finally, the court reversed the denial of prejudgment interest. Under D.C.Code § 15-108, prejudgment interest is mandatory for actions to recover a “liquidated debt” on which interest is payable by law or usage. Although the final recovery was reduced by DCLP's recoupment, the plaintiffs' action was to recover a liquidated debt. Applying the “interest on the net balance” rule from Giant Food, Inc. v. Jack I. Bender & Sons, 399 A.2d 1293 (D.C.1979), prejudgment interest is applied to the net overcharge (the actual damages) before trebling, as it constitutes part of the actual damages.
Analysis:
This case significantly clarifies the scope and application of the D.C. Consumer Protection Procedures Act (CPPA), establishing that violations of common law principles (like invalid liquidated damages clauses) are actionable under the statute. It firmly distinguishes between treble damages and punitive damages under the CPPA, affirming that treble damages are remedial and available upon a showing of "any damage," thereby lowering the burden of proof for plaintiffs seeking such relief. This distinction incentivizes private enforcement of consumer protection laws, allowing consumers to recover significant compensation without having to prove the high bar of malice typically required for punitive awards. Furthermore, the ruling on recoupment and prejudgment interest provides a precise framework for calculating damages in such cases, ensuring that consumers are made whole for net overcharges before statutory multipliers are applied.
