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CHATHAM RACQUET CLUB A/K/A DOWNTOWN RACQUET & ATHLETIC CLUB v. COMMONWEALTH PENNSYLVANIA BY ATTORNEY GENERAL (06/28/89)

decided: June 28, 1989.

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



Appeal from Common Pleas Court, Allegheny County, Honorable Maurice Louik, Judge.

COUNSEL

James R. Cooney, Nernberg & Laffey, Pittsburgh, for appellant.

Caren L. Mariani, Douglas P. Yauger, Office of the Atty. Gen., Bureau of Consumer Protection, Pittsburgh, for appellee.

Colins and McGinley, JJ., and Barbieri, Senior Judge. Barbieri, Senior Judge.

Author: Mcginley

[ 127 Pa. Commw. Page 210]

Chatham Racquet Club (Chatham) a/k/a Downtown Racquet Club appeals an order of the Court of Common Pleas of Allegheny County (Chancellor), which granted a permanent injunction sought by the Office of the Attorney General (Attorney General) pursuant to the Unfair Trade Practices and Consumer Protection Law (Consumer Protection Law), Act of December 17, 1968, P.L. 1224, as amended, 73 P.S. §§ 201-1--201-9.2. We reverse.

The facts are not in dispute. During the bankruptcy proceedings of the Downtown Racquet and Athletic Club (Facility), a new ownership group purchased the Facility's assets. The evidence at the hearing for permanent injunction established that at the bankruptcy proceedings several bids were made for the Facility, including one bid for $1,500,000 and Chatham's bid of $1,400,000. Chatham also offered to take the Facility subject to the memberships (members), whereas the higher bid did not include such an

[ 127 Pa. Commw. Page 211]

    undertaking.*fn1 The bankruptcy court entered an order directing the sale to Chatham with the specific provision that the sale was subject to the terms and conditions of a purchase agreement which in turn provided that the sale to Chatham was subject to all the membership contracts.

Subsequent to its purchase Chatham began to charge the members a monthly service fee which varied in amount depending upon the members' original contract. Despite this charge, Chatham offered no commensurate increase in services. The members complained and the Attorney General sought an injunction under the provisions of Section 4 of the Consumer Protection Law, 73 P.S. § 201-4 alleging there was reason to believe that Chatham was in the process of using a method, act or practice declared to be unlawful under the Consumer Protection Law.*fn2

The Attorney General alleged that the increase in members' fees constituted fraudulent conduct which created a likelihood of confusion or misunderstanding under Section 2 of the Consumer Protection Law, 73 P.S. § 201-2. After hearing, the Chancellor found that Chatham's acts created "a chaotic situation fraught with confusion." (Opinion of the Chancellor, November 26, 1986, at 5-6.) The Chancellor did not specifically find that Chatham had an intent to defraud anyone or that it had acted in bad faith, but

[ 127 Pa. Commw. Page 212]

    granted the injunction.*fn3 Chatham's petition for reconsideration was denied.

Chatham next sought a stay pending appeal in this Court. On May 9, 1988, this Court reversed the order of the Chancellor, vacated the preliminary injunction and remanded the case for a trial on the merits of the Attorney General's request for a permanent injunction.*fn4

After hearing on May 13, 1988, the Chancellor concluded that the action of Chatham

     in demanding or charging an additional service fee was in complete disregard of the Court Order and was a fraud, not only upon the Bankruptcy Court, but upon the consumers who were the objects of consideration of the Bankruptcy Court in ...


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