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State ex rel. Miller v. Awakened, Inc.

Court of Appeals of Iowa

September 27, 2017

STATE OF IOWA ex rel., THOMAS J. MILLER, Attorney General of Iowa, Applicant-Appellee,
v.
AWAKENED, INC., JOSHUA WEBER, and HEATHER WEBER, Respondents-Appellants.

         Appeal from the Iowa District Court for Polk County, David N. May, Judge.

         Awakened, Inc. and its owners, Joshua Weber and Heather Weber, appeal a district court order granting the State's application to enforce a consumer fraud subpoena, awarding the State investigation costs and attorney fees, and enjoining the operation of a private massage school.

          Judith M. O'Donohoe of Elwood, O'Donohoe, Braun, & White, L.L.P., Charles City, for appellants.

          Thomas J. Miller, Attorney General, and Max M. Miller, Assistant Attorney General, for appellee.

          Heard by Vogel, P.J., and Potterfield and Mullins, JJ.

          MULLINS, JUDGE.

         Awakened, Inc., doing business as East West Massage School, a private massage-therapy school, and its owners, Joshua Weber and Heather Weber (collectively referred to as "East West"), appeal a district court order granting the State's application to enforce a consumer fraud subpoena, awarding the State investigation costs and attorney fees, and enjoining the operation of the school. East West argues the district court erred in (1) awarding the State investigation costs and attorney fees because the proceeding to enforce the subpoena was not an action for an actual violation of the Consumer Fraud Act (CFA) and (2) enjoining the school's operation because it was simply concerned about student privacy and the injunction was not necessary to obtain compliance.[1]

         I. Background Facts and Proceedings

         East West provides massage-therapy instruction to individuals seeking to obtain a massage-therapy license in the State of Iowa. See Iowa Code § 152C.5 (2015) (prohibiting unlicensed individuals from practicing massage therapy). In October 2015, the Iowa Attorney General's Office received a complaint from a former East West student alleging, among other things, the school engaged in "deceitful advertising" on its website and the school's student handbook informed students all tuition was non-refundable, potential violations of Iowa law. See id. §§ 714.16(2)(a), 714.23. The Attorney General's Office forwarded the complaint to Mr. Weber, who submitted a response on East West's behalf. In March 2016, the Attorney General issued a subpoena pursuant to the CFA, Iowa Code section 714.16, requesting that East West provide documentation reflecting the following: (1) identification of all students who attended the school during a certain timeframe; (2) documentation concerning the enrollment of any such student, including but not limited to enrollment applications and contracts; (3) copies of all student handbooks in effect during a certain timeframe; (4) all documents in student financial files including payment plans, loan documents, and ledger cards reflecting all charges to and payments from students; and (5) information relating to the business and its owners. Ultimately, East West declined to comply with two of the State's requests, and the State filed an application to enforce the subpoena and requested the district court to, among other things, enforce the subpoena as it relates to request numbers two and four concerning enrollment and financial information of students; enjoin the school from advertising and providing further services to consumers; and award the State investigation costs and attorney fees for its efforts. See id. § 714.16(6), (11). In its application, the State noted its suspicion that East West engaged in, was engaging in, or was about to engage in violations of the CFA and the Iowa Consumer Credit Code (CCC), found in Iowa Code chapter 537 and in order to further investigate the conduct, it issued the subpoena under the authority of the CFA. The State subsequently filed an affidavit of attorney fees and investigation costs, forwarding a total claim of $12, 150.

         Following a hearing, the district court entered a written order requiring East West's compliance with the subpoena within fourteen days, enjoining the school from advertising or providing services to consumers thereafter until full compliance, and awarding attorney fees and investigation costs to the State in the amount of $3000.[2] East West moved for a stay of the payment of fees and the injunction pending appeal. The court granted the motion to stay, and East West appealed.

         II. Award of Attorney Fees and Investigation Costs

         East West argues the district court erred in awarding the State investigation costs and attorney fees because the proceeding to enforce the subpoena was not an action for an actual violation of the CFA. See id. § 714.16(11). The State argues the subpoena-enforcement action was "an action brought under" the CFA and, as such, an award of fees and costs was mandatory. Because our analysis primarily turns on statutory interpretation, our review is for legal error. See DuTrac Cmty. Credit Union v. Hefel, 893 N.W.2d 282, 289 (Iowa 2017).

         The CFA provides: "In an action brought under this section, the attorney general is entitled to recover costs of the court action and any investigation which may have been conducted, including reasonable attorneys' fees, for the use of this state." Iowa Code § 714.16(11) (emphasis added). Such an award of costs and fees is mandatory as "an element of the State's recovery in a successful consumer fraud action." State ex rel. Miller v. Fiberlite Int'l, Inc., 476 N.W.2d 46, 48 (Iowa 1991) (emphasis added). The issue before us, one of first impression, is whether the State's filing of an application to enforce a subpoena under section 714.16(6) amounts to an "action" under section 714.16(11), thus allowing an award of attorney fees and investigation costs when the State is successful in enforcement.

         The State argues an application to enforce a subpoena is an independent "action" under the CFA and, as such, an independent award of costs and fees is mandatory. Iowa Code section 714.16(6) governs applications to enforce a subpoena while section 714.16(7) concerns "actions" relating to violations of the CFA. The two are distinct. An award of costs and fees is only appropriate "in a successful consumer fraud action." Id. (emphasis added); accord Iowa Code ยง 714.16(11). The statute does not identify an application to enforce a subpoena as an "action." What is more, section 714.16(6) specifically provides the remedies the State is ...


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