Quichocho v. Macy's Department Stores, Inc.

• Court: Superior Court of Guam
• Decided: June 6, 2012
• Docket: CV0209-04
• Status: Unknown

Opinion

IN THE SUPERIOR COURT OF GUAM

3 DOROTHEA QUICHOCHO, MERLYNA ) W. SMITH, in their individual capacities ) 4 and as representatives of a class consisting ) of all persons similarly situated, ) ORD 5 ) 6 Plaintiffs, ) Vs. ) 7 ) MACY'S DEPARTMENT STORES, INC., ) 8 fka MACY'S WEST, INC., and DOES l- ) 9 XV, ) ) 10 Defendants. 11

12 This matter came before the HONORABLE VERNON P. PEREZ November 14,2011.

13 Plaintiffs were represented by attorney Thomas Tarpley. Neither named Plaintiff was present. 14 Defendant Macy's was represented by attorney Seth Forman. Having reviewed the pleadings 15 and the arguments presented, the Court now issues the following Order. 16

17 BACKGROUND

18 This case concerns Guam's Gross Receipts Tax (hereinafter "GRT"). Guam's GRT, and

19 gross receipt taxes in general, are periodically levied at a set percentage upon businesses every 20 fiscal quarter based on their gross receipts from that quarter. Normally, the burden of a receipt 21 tax is passed on to customers by businesses, who adjust their prices upward to account for the 22

23 portion of their monthly receipts which they know they will have to forfeit under the GRT. See

24 Quichocho v. Macy's 2008 Guam 9 at ~ 2 (2008). The issues at trial in this case are several 25 actions taken by Macy's in its Dededo branch, beginning in February of 2004, in response to 26 changes in the laws governing the GRT during 2003 and 2004. Id 27 28

Quichocho and similarly situated v. Macy's Order Civil Case No. CV0209-04 - Page I of 9 - II

In 2003 the Guam Legislature passed a law temporarily increasing the GRT levied on 2 businesses from 4% to 6% of quarterly gross receipts. See Guam Public Law 27-05:V:6. In 3 November of 2003 the Legislature passed another law related to implementation of the GRT; 4 Guam Public Law 27-41. Guam Public Law 27-41 added the following subsection to 11 G.C.A. 5

6 § 26201, which governs the levy of the GRT: "(b) A person engaging in, transacting,

7 conducting, continuing, doing, or carrying on a business in Guam, who is required to pay taxes 8 levied by this Chapter and opts to show to each customer the amount that will be transmitted to 9 the government of Guam as a result of the customer's transaction, may exclude GRT 10 reimbursement collected from the measure of taxable gross receipts." 11

12 Pursuant to these enactments by the Legislature, Macy's implemented a new pricing

13 policy on February 1,2004. Prior to this date Macy's policy was to charge customers the price 14 marked on its products on the shelf, what has been described in this case as "sticker price", and 15 subsequently to remit the GRT percentage of that sticker price to the Department of Revenue 16

17 and Taxation. After February 1, 2004 Macy's policy was changed so that customers were

18 charged (1) full sticker price, and also (2) an additional 6% percent on top of the sticker price 19 which was added at the cash register. See Quinchocho at ~ 3. Macy's announced this policy 20 change in a January 2004 press release and posted signs indicating the new policy at store 21 entrances and cash registers. [d. 22 23 On February 18, 2004 the Attorney General of Guam issued AGO 04-0215 which

24 discussed the legality and propriety of Macy's new policy and several other policies 25 implemented by retailers on Guam in response to the enactment of GPL 27-41. The Attorney 26 General opined that "the Macy's example complained of, where a 'stateside price' is posted on 27

28 the goods and the GRT added at checkout, is a violation of [11] GCA § 26115". The opinion

Quichocho and similarly situated v. Nacy's Order Civil Case No. CV0209-04 - Page 2 of9- when entering the store". Id at ~ 4. Defendant Macy's (hereinafter "Macy's") altered the 2 signage concerning the new policy on February 12,2004, but left the new policy in place. Id at 3 ~ 5. This lawsuit was filed February 26, 2004, premised on Macy's alleged violation of 11 4 GCA § 26115 and other Guam statutes. (See Class Action for Damages, Restitution, 5

6 Disgorgement, Injunctive Relief, and Demand for Jury Trial at pg. 4) Ms. Quichocho entered a

7 declaration stating that she purchased items from Macy's during the time frame specified by the 8 Plaintiffs and that she was charged additional GRT at the register. (See Quichocho Declaration 9 (filed July 20, 2004) at pgs. 1-2; see also Plaintiffs' Reply to Macy's Opposition for 10 Certification of Class (filed August 25,2004» 11

12 Subsequent to the filing of this lawsuit, Macy's kept the new policy in place while

13 continually revising disclaimers both within the store and in advertisements dispersed around 14 the island. Id at ~ 7-8. Assistant Attorney General Charles Troutman wrote a letter to Macy's 15 counsel on November 24, 2004 opining that Macy's current disclaimer procedures were 16

17 "acceptable".Id at ~ 9. Meanwhile, the Plaintiffs added Ms. Smith as a second named Plaintiff

18 and amended their complaint to include a count for violation of Guam's Deceptive Trade 19 Practice Consumer Protection Act (hereafter DTP-CP A). Id. at ~ 10 20 On September 21, 2004 Judge Steven Unpingco denied two motions to dismiss filed by 21 Macy's and by another defendant (ABC) no longer party to this lawsuit. (See Decision and 22

23 Order of September 21, 2004 at pg. 7) In his Decision and Order Judge Unpingco disallowed

24 any claim arising directly from violations of 11 G.C.A. § 26115, but stated that any potential 25 violation of 11 G.C.A. § 26115 could be used as evidence to support a Plaintiffs' claim of 26 restitution on an unjust enrichment theory or any other common law cause of action. (See 27 Decision and Order at pgs. 5-6) 28

Quichocho and similarly situated v. Macy's Order Civil Case No. CV0209-04 - Page 3 of 9 - 1 On April 17, 2007, Judge Katherine A. Maraman granted (1) Macy' s' s Motion to

2 Dismiss the DTP-CPA claim of Plaintiff Quichocho's Second Amended Complaint with leave 3 to amend and (2) Macy's's Motion to Dismiss Plaintiff Quichocho's unjust enrichment claim 4 without leave to amend. (See Decision and Order of April 17, 2007 at pg. 11) Final Judgment 5

6 was entered on July 11, 2007; Plaintiffs filed a timely notice of appeal on July 31, 2007. On

7 June 27, 2008 the Guam Supreme Court returned a decision on the appeal; Quichocho v. Macy's 8 2008 Guam 9 (2008). Both previous rulings by Judge Maraman were reversed and the case was 9 remanded for further proceedings consistent with the Supreme Court's opinion. (See 10 Quichocho at , 58) 11

12 On April 20, 2009 the Plaintiffs filed a Fourth Amended Class Action Complaint, which

13 Macy's answered on April 23. Trial on this matter occurred March 31, 2011. Judgment was 14 found in favor of Plaintiffs on both the claims for unjust enrichment and under the Consumer 15 Protection Act. Now, the Court is in post-judgment and the following issues will be addressed 16

17 as well as Plaintiffs' Motion for Entry of Judgment.

18 DISCUSSION 19

20 I. Prejudgment Interest

21 This Court reserved on several issues because those issues would be moot under

22 different circumstances. Plaintiffs argue that prejudgment interest should be included in the 23 award because Macy's benefited by the improper taxing during the pendency of this case. 24 Macy's argues that it acted in good faith and prejudgment interest would be an unjust penalty. 25 l 26 This Court will not impose pre-judgment interest as it finds Macy's argument convincing.

28 Courts will impose pre-judgment interest where defendants engage in intentional behavior. Bank ofAmerica National Trust & Savings Association v. Ryan, 207 CaL App. 2d 698, 702-03(1962).

Quichocho and similarly situated v. Macy's Order Civil Case No. CV0209-04 - Page 4 of9- Macy's relied on the opinion of the Attorney General and should not be penalized further for its 2 urUust enrichment. As explained in the Findings of Fact and Conclusions of Law filed on 3 September 16, 2011, this Court will not impose pre-judgment interest. 4 II. Attorney Fees 5

6 This Court also reserved on the issue of attorney's fees for class counsel. As it stands,

7 the issue is not moot and this Court must determine the reasonable attorney's fees because the 8 Parties are unable to make that determination. Plaintiffs argue for 25% of the total award under 9 the Common Fund Doctrine. Plaintiffs contend that the benchmark percentage is appropriate 10 here because class counsel was never able to communicate an appropriate fee arrangement as 11

12 the class size is much too large.

l3 Macy's argues for attorney fees as provided by 7 GCA § 26601. Macy's furthers its 14 contention by citing cases that have awarded significantly lower percentages in cases involving 15 greater awards. Macy's also contends that class counsel did not make the arrangement with the 16 17 class at the inception of this case, thus barring a 20-30% contingency fee.

18 The Court finds the Common Fund Doctrine to be suitable in the present matter. First 19 and foremost, a 25% contingency fee is appropriate generally. Secondly, for the amount of 20 work involved in this case, this Court is confident that 25% is appropriate and reasonable. 7 21 GCA § 26601 governs attorney's fees in personal injury and death cases. This matter does not 22 23 involve damages from personal injury or death and thus 7 GCA § 26601 does not limit the

24 attorney's fees in this case. Furthermore, the class size is vast and a mutually agreeable fee 25 arrangement would be hard to obtain. Here, the Court shall award 25% of the total award to 26 class counsel as attorney's fees. The Court will only award the contingent fee of 25% and not 27 hourly fees in addition to that sum. The 25% will be taken from the entire award regardless if 28

Quichocho and similarly situated v. Macy's Order Civil Case No. CV0209-04 - Page 5 of9- any of the award reverts back to the Macy's. See Van Gernert v. Boeing Co., 739 F.2d 730 (2d 2 Cir. 1984). The Court understands that 5 GCA § 32109 allows recovery of reasonable attorney's 3 fees and, here, this Court orders that the 25% be taken from entire fund regardless of whether or 4 not reversion of surplus funds occurs. Id This Court earlier decided that the entire fund should 5

6 amount to $3,449,896.00 as restitution as parties have stipulated to this fact. Stipulations for

7 Trial ~33; Findings of Fact and Conclusions of Law at 18. Class counsel will be paid 25% of 8 this amount and each individual claim shall reflect a 25% smaller award. 9 III. Surplus Funds 10 The Court also reserved on the issue of what do with unclaimed funds. Plaintiffs ask 11

12 that the Cy Pres Doctrine be applied to prevent Macy's from recouping the award that goes

13 unclaimed. Plaintiffs would like the Court to order Macy's tum over the entire award to a 14 Consumer Protection Fund so that Macy's does not benefit from its improper taxing of 15 customers. Macy's argues that it should only be ordered to payout an amount equal to 16

17 verifiable claims actually made by consumers.

18 The Court finds that because the class is not entirely identified, it would be an iftiustice 19 to order any amount be paid without finding a party that should be awarded. Certainly, some 20 consumers shopped more than once at Macy's over the years of the illegal tax. Some 21 unidentified Plaintiffs could be eligible to obtain a much higher award depending on the amount 22

23 of purchases and size of purchases. Therefore, the Court must ensure that claims made are

24 actually owed through some showing of cognizable evidence before paying out the award 25 aimlessly. The method in which unclaimed and surplus funds are dealt with is determined to be 26 within the discretion of the Court. California v. Levi Strauss, 224 Cal. Rptr. 605, 606 (1986). 27 Reversion of the unclaimed award to Macy's is a reasonable alternative. Finally, Macy's should 28

Quichocho and similarly situated v. Macy's Order Civil Case No. CV0209-04 - Page 6 of9 - not be required "to pay more than the amount claimed." Van Gernert at 736-37. Thus, the 2 Court will now order that any funds not claimed within three years of final judgment in this case 3 shall be returned. 4 IV. Notice to Non-Named Plaintiffs and Degree of Proof Non-Named Plaintiffs Need 5

6 V. Show

7 Another issue reserved by this Court relates to the notice to non-named Plaintiffs and the 8 proof they need show to recover on a claim to the fund. The Court will require the most 9 encompassing notice procedures available to the Court. Macy's will return payment to each 10 individual named in records of all credit card purchases during the times of the illegal tax. 11

12 Notice of the opportunity to make a claim shall be posted in at least one newspaper for the next

13 eighteen(18) months. In re Exxon Valdez, 289 Fed. Appc. 204, 205-06 (9 th Cir. 2008). The 14 notice in the paper must run for at least one day each month during those eighteen (18) months 15 and shall be a quarter page. Any other reasonable method to notify unnamed Plaintiffs available 16

17 to Macy's shall be used in addition to the above notices required by this Court.

18 As to degree of proof, the non-named Plaintiffs must show, reasonable and quality 19 evidence indicating a purchase made at Macy's during the time of the illegal tax. All notices to 20 the public regarding the availability to make a claim shall state the requirement of proof via: 21 receipt, credit card or debit card statement, or a canceled check payable to Macy's. This degree 22

23 of proof does not preclude the possibility that a claimant show proof of a viable claim through

24 some other reasonable and quality evidence. Any record within the Parties control indicating 25 that a Plaintiff exists by name shall be enough to warrant payment. As to currently active credit 26 card account holders with current Guam addresses, the Court finds Macy's proposal proper. 27 Macy's will notify said account holders and reimburse a credit to the account. If the credit 28

Quichocho and similarly situated v. Macy's Order Civil Case No. CV0209-04 - Page 7 of9- exceeds the balance remaining on the Macy's Credit Account, the account holder may elect

2 between the receipt of a check in the amount of the credit or have it carried over on the account 3 for future use. 4 The Court will also require Macy's to retain an administrator to administer the claims as 5

6 they come in. Parties will work together to see that the Court does not have to become a

7 watchdog over the claims process but the Court will resolve any dispute, if need be, arising over 8 any amount to be paid per claimant or issues arising over documentation. The final details of 9 the notice and distribution plan will be approved by the Court after its review of said plan. 10 VI. Motion for Entry of Judgment 11

12 As to Plaintiffs' Motion for Entry of Judgment, the Court will reserve on final judgment

13 until after all issues are decided. This Order resolves all apparent remaining issues and 14 judgment shall be handed out at some time in the near future. 15

18 I I

22 23

24 I I 25

26 27

Quichocho and similarly situated v. Macy's Order Civil Case No. CV0209-04 - Page 8 of9- CONCLUSION

2 For the foregoing reasons, the Court ORDERS that the Motion for Entry of Judgment is 3 DENIED and that the various orders designated in the above discussion be fully implemented. 4 Three years from the date of final judgment in this matter, the surplus funds will remain with 5

6 Macy's though reversion. Macy's will be allowed to make payment of individual claims out of

7 its general assets and will not be required to maintain a fund for the award. The Court will also 8 require that Macy's be very open to working with the Plaintifs' Attorney during the distribution 9 of claims. To ensure that class counsel is paid, payment shall be made to class counsel in the 10 amount of25% of $3,449,896.00, which is $862,474.00, as soon as reasonably possible. 11

12 So ORDERED this {i;Ifv day of June, 2012.

14 PEREZ 15 HON RABLE VERNON P. PEREZ 16 JUDGE, SUPERIOR COURT OF GUAM 17

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