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CHATHAM RACQUET CLUB v. COMMONWEALTH PENNSYLVANIA (05/09/88)

decided: May 9, 1988.

CHATHAM RACQUET CLUB, A/K/A DOWNTOWN RACQUET CLUB 1000, APPELLANT
v.
COMMONWEALTH OF PENNSYLVANIA, BY ATTORNEY GENERAL LEROY S. ZIMMERMAN, APPELLEE



Appeal from the Order of the Court of Common Pleas of Allegheny County, in the case of Commonwealth of Pennsylvania, by Attorney General LeRoy S. Zimmerman v. Chatham Racquet Club a/k/a Downtown Racquet & Athletic Club, 1000 Colwell Street, Pittsburgh, Pennsylvania 15219, No. GD 86-12416.

COUNSEL

James R. Cooney, with him, Mitchell A. Kaufman and Maurice A. Nernberg, Jr., Nernberg & Laffey, for appellant.

Douglas P. Yauger, Deputy Attorney General, with him, Caren L. Mariani, Office of Attorney General, Bureau of Consumer Protection, for appellee.

Judges MacPhail, Colins and McGinley, sitting as a panel of three. Opinion by Judge MacPhail.

Author: Macphail

[ 116 Pa. Commw. Page 57]

Before us for disposition is an appeal by the Chatham Racquet Club (Club) from an order of the Court of Common Pleas of Allegheny County which granted a preliminary injunction sought by the Office of Attorney General pursuant to Section 4 of the Unfair Trade Practices and Consumer Protection Law, Act of December 17, 1968, P.L. 1224, as amended, 73 P.S. § 201-4 (Act).

The facts are not in dispute. The Downtown Racquet and Athletic Club was in bankruptcy. A new ownership group purchased the facility's assets through the bankruptcy court proceedings. The purchase was "subject to" the membership contracts of the Downtown Racquet and Athletic Club. Subsequent to its purchase of the membership contracts, the Club began to charge patrons with current memberships a monthly service fee which varied in amount. Despite this fee charge, the trial court found that the Club offered its members no commensurate increase in services. Club members complained and the Attorney General then took legal action under the provisions of Section 4 of the Act. That Section permits the Attorney General to seek an injunction when he has reason to believe that any person is or is about to violate any substantive provision of the Act.

The Attorney General brought his complaint in equity alleging that the increase in current members' fees constituted fraudulent conduct which creates a likelihood of confusion or misunderstanding. Such conduct is prohibited by Section 2 of the Act, 73 P.S. § 201-2 (defining, inter alia, unfair methods of competition and unfair or deceptive acts or practices).

[ 116 Pa. Commw. Page 58]

The trial court found as fact that the Club's action in increasing fees did engender "a chaotic situation fraught with confusion." It did not specifically find, however, that the Club had an intent to defraud anyone or that it had acted in bad faith. The court then granted a preliminary injunction and its order directed the following:

A. That Defendant is enjoined from barring any member with a valid contract with prior owners, purchased by current owners, from using any facility at 1000 Colwell Street, Pittsburgh, Pa., provided that all disputed monthly charges incurred after August, 1986 until final disposition of this case are paid into an escrow account more fully described below.

B. That the Office of Attorney General, Bureau of Consumer Protection, as escrow agent, shall establish an interest-bearing account into which members' disputed monthly charges shall be deposited. Defendant shall have access to the account for auditing purposes. Within a reasonable time after the tenth day of each month prior to final disposition of this case, the Office of Attorney General shall present to Defendant a list of all members who have paid their charges into escrow pursuant to paragraph A above. This account is in no manner to be considered an asset of Defendant until final disposition of this case.

C. That Defendant shall prepare and deliver to the Office of Attorney General, Bureau of Consumer Protection, a full and complete list of members affected by this Order, including an itemized accounting of monthly dues, charges and credits. ...


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