SW Legal studies in Business

Business Owner Personally Liable for Restitution to Consumers for Deceptive Practices
Description Appeals court held, in a deceptive business practice case, that a judgment ordering $6 million in restitution to consumers, plus penalties, could become the personal liability of the owners and operators of the businesses who profited from the operation.
Topic Consumer Protection
Key Words Deception; Liability; Restitution
C A S E   S U M M A R Y
Facts Kossol was a major operating partner in Continental Food Network, which sold food plans to consumers. Consumers signed contracts to pay thousands of dollars for a plan that was supposed to provide them a certain quantity of food over several years and give them a "free" freezer. In fact the freezers were sold for triple their market value and the food was not the quantity or quality claimed. The Consumer Protection Division of the Attorney General office of Maryland sued to have the operation shut down and ordered $6 million in restitution paid to customers, plus $265,000 in penalties paid to the state. Kossol was held jointly and severally liable for the payments. He appealed, contending that the business could be held liable, but that he could not be held liable personally.
Decision Affirmed. A business owner who participated in the creation, development, and implementation of deceptive business practices of two corporations in the sale of food plans and freezers to consumers received benefits from the corporations in his capacity as an officer and shareholder in each of them, and thus, he could be held personally liable for the restitution to consumers and the civil penalties to be paid to the state. When one is unjustly enriched at the expense of another, restitution can be required.
Citation State of Maryland Central Collection Unit v. Kossol, - A.2d - (2001 WL 431256, Ct. Spl. App., Mary., 2001)

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