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MAINE SUPREME JUDICIAL COURT                                                       Reporter of Decisions

Decision:       2005 ME 28

Docket:         Ken-03-406

Argued:        November 16, 2004

Decided:       February 15, 2005

Panel:               CLIFFORD, RUDMAN, DANA, ALEXANDER, CALKINS, and LEVY, JJ.

Majority:          CLIFFORD, RUDMAN, DANA, and ALEXANDER, JJ.

Dissent:            CALKINS, and LEVY, JJ.

STATE OF MAINE

v.

FREDERIC D. WEINSCHENK et al.

ALEXANDER, J.

         [¶1] Frederic D. Weinschenk and Ric Weinschenk Builders, Inc. (RWB) appeal from a judgment and order of the Superior Court (Kennebec County, Studstrup, J.) finding that they violated the Unfair Trade Practices Act (UTPA), 5 M.R.S.A. §§ 207, 209 (2002), by engaging in a pattern or practice of unfair or deceptive acts by (1) selling defective houses that did not comply with generally accepted construction practices, and (2) misrepresenting to consumers the quality of the construction of the houses. Weinschenk and RWB contend that the court erred in: (1) finding violations of the UTPA; (2) imposing injunctive relief; (3) awarding restitution to indirect purchasers; (4) holding Weinschenk individually liable; and (5) dismissing their counterclaim. We affirm the finding that Weinschenk and RWB violated the UTPA, the imposition of injunctive relief and the dismissal of the counterclaim. Because the court erred in awarding restitution to indirect purchasers, we vacate and remand for correction of the judgment regarding restitution.

         [¶2] Frederic Weinschenk has been involved in the construction business for forty years. After moving to Maine in the early 1980s, Weinschenk built what he described as "high-end" single-family houses. In the early 1990s, Weinschenk developed a plan to create moderately priced, compact, custom-designed single-family houses. By lowering construction costs, Weinschenk was able to build houses costing twenty-five to thirty percent less per square foot than the "high-end" houses he had previously built. Weinschenk then formed RWB. With RWB, Weinschenk created several housing developments in the Portland area. Although buyers contracted directly with RWB for the construction work, all of the original buyers met individually with Weinschenk, and he personally designed the houses in each development.

         [¶3] While some buyers were pleased with their newly constructed houses, and nearly all were satisfied with the intricate design, buyers in three of the developments experienced significant problems with their houses shortly after moving in. Homeowners reported severe leaks from the windows and roofs, bursting pipes, leaking toilets, and cracks in tiles and in the foundation.

         [¶4] Complaints from homeowners led the Attorney General to investigate Weinschenk and RWB's trade practices. Upon inspection of fifteen houses, the State's consulting engineer identified several common defects in the houses. He reported that the stairs did not comply with applicable building codes, the roofs and windows compromised the weather tightness of the houses, and overall, the houses were "poorly built." The State then commenced an action against Weinschenk and RWB pursuant to the UTPA, 5 M.R.S.A. § 209. RWB and Weinschenk filed a counterclaim alleging that by bringing suit, the State unilaterally abrogated a consent agreement that Weinschenk had entered into with the Maine Oil and Solid Fuel Board.[1]

         [¶5] A non-jury trial was held in Superior Court. A number of individuals who owned houses designed by Weinschenk and constructed by RWB testified about problems in their houses. Several of the homeowners who testified at trial were "indirect purchasers," that is, they were the second or third buyers of the homes rather than the original purchaser. The indirect purchasers did not contract with RWB for construction purposes, nor did they consult with Weinschenk regarding the design of their houses.

         [¶6] The Superior Court found that Weinschenk and RWB violated the UTPA by engaging in a pattern or practice of unfair or deceptive acts by selling houses that were defective and that did not comply with generally accepted construction practices, and by misrepresenting to consumers the quality of the construction of the houses. The court ordered Weinschenk and RWB to pay $221,256 in restitution, through the Attorney General, for the benefit of nine of the homeowners. Five of these homeowners were indirect purchasers, and four purchased their homes directly from Weinschenk and RWB. The Superior Court also issued injunctions against Weinschenk and RWB, requiring them to meet a number of requirements before building any residential dwelling in the State. In addition, the court dismissed the counterclaim, finding that the State had not waived sovereign immunity.

         [¶7] Weinschenk and RWB appeal.

II. STANDARD OF REVIEW

         [¶8] Whether a trade practice is unfair or deceptive is a question of fact determined by the fact-finder. Binette v. Dyer Library Ass'n, 688 A.2d 898, 906 (Me. 1996). Accordingly, we review findings of violations of the UTPA for clear error. State v. Shattuck, 2000 ME 38, ¶ 13, 747 A.2d 174, 178. Findings of fact are clearly erroneous only when no competent evidence supporting the finding exists in the record. Estate of Deschenes, 2003 ME 35, ¶ 11, 818 A.2d 1026, 1030.

         [¶9] When there is a challenge to a court ordered injunction, we review the issuance of the injunction for a sustainable exercise of the court's discretion; Bates v. Department of Behavioral and Developmental Services, 2004 ME 154, ¶ 38, 863 A.2d 890, 901; we review the factual findings underlying the exercise of that discretion for clear error. State v. DeCoster, 653 A.2d 891, 895 (Me. 1995).

         [¶10] A motion to dismiss pursuant to M.R. Civ. P. 12(b)(6) tests the legal sufficiency of a complaint or counterclaim. New Orleans Tanker Corp. v. Dep't of Transp., 1999 ME 67, ¶ 3, 728 A.2d 673, 674-75. We review the material allegations of the complaint or counterclaim in the light most favorable to the party asserting the claim to determine whether it sets forth elements of a cause of action or alleges facts that would entitle that party to relief pursuant to some legal theory. Id.

III. LEGAL ANALYSIS

A.      The Unfair Trade Practices Act

         [¶11] Maine's UTPA, 5 M.R.S.A. §§ 205-A to 214 (2002), provides protection for consumers against unfair and deceptive trade practices. It declares unlawful "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." 5 M.R.S.A. § 207. In enacting the UTPA in 1969, the Legislature intended "to bring into Maine law the federal interpretations of