Introduction. Among the areas where businesses are increasingly vulnerable to litigation is in the area of consumer protection statutes. One such statute is the Texas Deceptive Trade Practices and Consumer Protection Act, more commonly known as the “DTPA”. The DTPA was originally enacted to: 1) provide consumers with a cause of action for deceptive trade practices without the burden of proof and numerous defenses encountered in common-law fraud or breach of warranty suits; 2) encourage consumers to litigate claims that would not otherwise be economically feasible by permitting a successful plaintiff to recover attorneys fees; and 3) to deter false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty in trade or commerce. The Act authorizes actions by the Consumer Protection Division of the Texas Attorney General’s office, and also provides a private civil remedy to consumers for deceptive trade practices that are a producing cause of economic and mental anguish damages to the consumer. The DTPA applies to trade and commerce which is defined in the Act as advertising, offering for sale, sale, lease, or distribution of any good or service, of any property, tangible or intangible, real, personal, or mixed, and any other article, commodity, or thing of value, wherever situated, and shall include any trade or commerce directly or indirectly affecting the people of Texas. This expansive definition promotes wide applicability of the DTPA against businesses. In order to avoid DTPA liability, it is essential to have a basic understanding of the DTPA, the conduct that can lead to liability, and steps that can be taken to minimize the risk of being sued.
Intent. Intent to Deceive is irrelevant to DTPA liability. Defendants are often surprised to learn that even though they did not intend to make a misrepresentation to the consumer, such good intent is not a defense to a DTPA action. Unlike a common law fraud claim, which requires the plaintiff to prove that the speaker knew the representation was false or made it recklessly without any knowledge of the truth, there is no requirement under most provisions of the DTPA to prove the Defendant intended to misrepresent or had knowledge that the representation was false. For example, Texas courts have determined that when a seller makes affirmative representations in the context of a sales transaction, the law imposes a duty to know whether that statement is true, and liability may attach when untrue representations are made whether or not they were known to be untrue. All a DTPA plaintiff is required to prove to win a DTPA case is: 1) the plaintiff was a consumer; 2) the defendant engaged in conduct prohibited by the Act; and 3) the prohibited conduct was a producing cause of the consumer's damages. Producing cause is an act that is a substantial factor that brings about injury and without which the injury would not have occurred.
Who is a Consumer? There are two basic requirements for an individual or business to qualify as a consumer under the DTPA: 1) the consumer must have sought or acquired, by purchase or lease, goods or services; and 2) the acquired goods or services must form the basis of the complaint. The DTPA, however, does not apply to business consumers that have assets of $25 million or more, or that are owned or controlled by a corporation or entity with assets of $25 million or more. An individual "seeks" goods or services when he or she requests or asks for them. One "acquires" goods or services when one gets or comes to have the goods or services as one's own. And the DTPA, does not require a plaintiff to be a direct purchaser of the good or service, as long as the plaintiff is the beneficiary of those goods or services. Consumer status can also be established merely by seeking to acquire goods or services, even if they are not actually acquired. It is unnecessary for money to change hands to establish consumer status. It is also unnecessary for there to have been a written agreement or an actual purchase; it is sufficient for the plaintiff to seek to acquire goods or services in good faith. DTPA claims are generally not assignable by an aggrieved consumer to someone else.
Who is a Proper DTPA Defendant? The DTPA provides that a consumer may bring suit against any person whose false, misleading, or deceptive acts or other practices identified in the Act are a producing cause of the consumer’s harm. Person is defined in the statute as an individual, partnership, corporation, association, or other group however recognized. An employee, who personally participated in a transaction can be held personally liable for violations of the Act, even if he had no intent to deceive anyone and did not know his representations were false.
Prohibited Trade Practices actionable under the DTPA. There are four primary categories of prohibited trade practices under the DTPA, which are: 1) breach of express or implied warranties; 2) violations of Chapter 541 of the Texas Insurance Code; 3) an unconscionable action or course of action; and 4) conduct by the Defendant relied on to the consumer’s detriment which are specifically identified in the DTPA statute as false, misleading or deceptive (the “laundry list”). While DTPA does not create any warranty, the breach of both express and implied warranties, created by the common law or other statutes, are actionable under the DTPA. An “unconscionable action or course of action” is an act or practice that, to a consumer's detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree. Taking advantage of a consumer to a grossly unfair degree requires a showing that the resulting unfairness was glaringly noticeable, flagrant, complete and unmitigated. Whether an act is unconscionable is determined by an objective standard, and whether the defendant knew or should have know the act was unconscionable is irrelevant to the determination of DTPA liability.
The Laundry List of Prohibited Conduct. The Act also prohibits conduct specifically identified as false, misleading, or deceptive acts or practices as follows:
passing off goods or services as those of another;
causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services;
causing confusion or misunderstanding as to affiliation, connection, or association with, or certification by another;
using deceptive representations or designations of geographic origin in connection with goods or services;
representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which the person does not;
representing that goods are original or new if they are deteriorated, reconditioned, reclaimed, used, or secondhand;
representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another;
disparaging the goods, services, or business of another by false or misleading representation of facts;
advertising goods or services with intent not to sell them as advertised;
advertising goods or services with intent not to supply a reasonable expect able public demand, unless the advertisements disclosed a limitation of quantity;
making false or misleading statements of fact concerning the reasons for, existence of, or amount of price reductions;
representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law;
knowingly making false or misleading statements of fact concerning the need for parts, replacement, or repair service;
misrepresenting the authority of a salesman, representative or agent to negotiate the final terms of a consumer transaction;
basing a charge for the repair of any item in whole or in part on a guaranty or warranty instead of on the value of the actual repairs made or work to be performed on the item without stating separately the charges for the work and the charge for the warranty or guaranty, if any;
disconnecting, turning back, or resetting the odometer of any motor vehicle so as to reduce the number of miles indicated on the odometer gauge;
advertising of any sale by fraudulently representing that a person is going out of business;
advertising, selling, or distributing a card which purports to be a prescription drug identification card issued under Section 4151.152, Insurance Code, in accordance with rules adopted by the commissioner of insurance, which offers a discount on the purchase of health care goods or services from a third party provider, and which is not evidence of insurance coverage, unless: a) the discount is authorized under an agreement between the seller of the card and the provider of those goods and services or the discount or card is offered to members of the seller; b) the seller does not represent that the card provides insurance coverage of any kind; and c) the discount is not false, misleading, or deceptive;
using or employing a chain referral sales plan in connection with the sale or offer to sell of goods, merchandise, or anything of value, which uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods and in connection with the purchase receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the names of other prospective buyers if receipt of the compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods;
representing that a guaranty or warranty confers or involves rights or remedies which it does not have or involve, provided, however, that nothing in this subchapter shall be construed to expand the implied warranty of merchantability as defined in Sections 2.314 through 2.318 and Sections 2A.212 through 2A.216 to involve obligations in excess of those which are appropriate to the goods;
promoting a pyramid promotional scheme, as defined by Section 17.461;
representing that work or services have been performed on, or parts replaced in, goods when the work or services were not performed or the parts replaced;
filing suit founded upon a written contractual obligation of and signed by the defendant to pay money arising out of or based on a consumer transaction for goods, services, loans, or extensions of credit intended primarily for personal, family, household, or agricultural use in any county other than in the county in which the defendant resides at the time of the commencement of the action or in the county in which the defendant in fact signed the contract; provided, however, that a violation of this subsection shall not occur where it is shown by the person filing such suit that the person neither knew or had reason to know that the county in which such suit was filed was neither the county in which the defendant resides at the commencement of the suit nor the county in which the defendant in fact signed the contract;
failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed;
Using the term "corporation," "incorporated," or an abbreviation of either of those terms in the name of a business entity that is not incorporated under the laws of this state or another jurisdiction;
selling, offering to sell, or illegally promoting an annuity contract under Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's Texas Civil Statutes), with the intent that the annuity contract will be the subject of a salary reduction agreement, as defined by that Act, if the annuity contract is not an eligible qualified investment under that Act or is not registered with the Teacher Retirement System of Texas as required by Section 8A of that Act;
taking advantage of a disaster declared by the governor under Chapter 418, Government Code, by: a) selling or leasing fuel, food, medicine, or another necessity at an exorbitant or excessive price; or b) demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, or another necessity;
delivering or distributing a solicitation in connection with a good or service that: a) represents that the solicitation is sent on behalf of a governmental entity when it is not; or b) resembles a governmental notice or form that represents or implies that a criminal penalty may be imposed if the recipient does not remit payment for the good or service;
using the translation into a foreign language of a title or other word, including "attorney," "lawyer," "licensed," "notary," and "notary public," in any written or electronic material, including an advertisement, a business card, a letterhead, stationery, a website, or an online video, in reference to a person who is not an attorney in order to imply that the person is authorized to practice law in the United States.
delivering or distributing a solicitation in connection with a good or service that resembles a check or other negotiable instrument or invoice, unless the portion of the solicitation that resembles a check or other negotiable instrument or invoice includes the following notice, clearly and conspicuously printed in at least 18-point type: "SPECIMEN-NON-NEGOTIABLE";
in the production, sale, distribution, or promotion of a synthetic substance that produces and is intended to produce an effect when consumed or ingested similar to, or in excess of, the effect of a controlled substance or controlled substance analogue, as those terms are defined by Section 481.002, Health and Safety Code: a) making a deceptive representation or designation about the synthetic substance; or b) causing confusion or misunderstanding as to the effects the synthetic substance causes when consumed or ingested; or
a licensed public insurance adjuster directly or indirectly soliciting employment, as defined by Section 38.01, Penal Code, for an attorney, or a licensed public insurance adjuster entering into a contract with an insured for the primary purpose of referring the insured to an attorney without the intent to actually perform the services customarily provided by a licensed public insurance adjuster, provided that this subdivision may not be construed to prohibit a licensed public insurance adjuster from recommending a particular attorney to an insured.
Compared to Breach of Contract Claims. A mere breach of contract without more does not constitute a false, misleading or deceptive act in violation of the DTPA. There has to be more than just a breach of the agreement. For example, a contractual promise made with no intention of performing it may give rise to an action for fraudulent inducement which is actionable. Procuring a contract through fraud or misrepresentation is actionable under the DTPA.
Damages. When successful in establishing DTPA liability, a plaintiff may recover economic damages, defined as compensatory damages for pecuniary loss, including costs of repair and replacement. Economic damages do not include exemplary damages or damages for physical pain and mental anguish, loss of consortium, disfigurement, physical impairment, or loss of companionship and society. A consumer can submit to the fact finder alternative measures of damages and recover the greatest. For example, traditional measures of damages in a misrepresentation case can either be “out of pocket expenses” or “loss of benefit of the bargain.” The out of pocket measure computes the difference between the value paid and the value received, while the benefit of the bargain measure computes the difference between the value as represented and the value received. However, recoverable damages are not limited to out of pocket or benefit of bargain measures, rather, other damages are recoverable to ensure that the plaintiff is made whole. Other damages which may be recovered, depending on the case, include reasonably necessary expenses related to defendant’s conduct; lost profits; damage to credit; and consequential damages. The successful plaintiff also recovers court costs and reasonable and necessary attorneys' fees; and other relief which the court deems proper in the particular case. The Plaintiff’s failure to mitigate his damages can be used as a defense in DTPA actions. The limitation on the recovery of economic damages under the DTPA is not applicable if the another law permits a cause of action to be brought under the DTPA. In such a case, the claimant is not limited to recovery of economic damages only, but may recover any actual damages incurred by the claimant, without regard to whether the conduct of the defendant was committed intentionally.
Knowing violations. If the Defendant’s conduct was found to be committed knowingly, the consumer may also recover, in addition to other damages, mental anguish, and up to three times the amount of economic damages. Knowingly means the Defendant acted with actual awareness of the falsity, deception, or unfairness of the act or practice which is the subject of the consumer’s complaint, and may be inferred where there are objective manifestations that the Defendant acted with actual awareness. Actual awareness does not mean merely that a person knows what he is doing; rather, it means that a person knows that what he is doing is false, deceptive, or unfair. Even if no economic damages are proved, mental anguish damages may still be recoverable when the defendant acts knowingly. To recover mental anguish damages, a plaintiff must present direct evidence of the nature, duration, and severity of the mental anguish establishing a substantial disruption in the plaintiff’s daily routine. There must be evidence of a high degree of mental pain and distress that is more than mere worry, anxiety, vexation, embarrassment, or anger.
Intentional Violations. If the Defendant’s conduct was committed intentionally, the consumer may recover, in addition to the other damages, mental anguish as found by the trier of fact, and up to three times the amount of damages for mental anguish and economic damages. Intentionally means the Defendant acted with actual awareness of the falsity, deception, or unfairness of the act or practice and intended the consumer to rely on that act or practice, and may be inferred from objective manifestations that indicate that the person acted intentionally or from facts showing that a defendant acted with flagrant disregard of prudent and fair business practices such that thedefendant should be treated as having acted intentionally.
Claims Excluded from the DTPA. With certain exceptions, the DTPA does not apply to: 1) advertisements in a regularly published newspaper, magazine, telephone directory, broadcast station, or billboard unless the publisher has knowledge of the false, deceptive, or misleading practice or has a financial interest in the publication; 2) acts or practices authorized by rules or regulations of the Federal Trade Commission; 3) causes of action for bodily injury or death or for the infliction of mental anguish; 4) claims against persons or their employers for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill; 5) claims arising out of a written contract if the total consideration was more than $100,000, the consumer was represented by legal counsel of their choosing, and does not involve the consumer’s residence; and 6) causes of action arising from a transaction(s), or project, involving total consideration by the consumer of more than $500,000, other than a cause of action involving a consumer's residence.
Statute of Limitations. DTPA actions must be brought within two years after the date on which the false, misleading, or deceptive act or practice occurred or within two years after the consumer discovered or in the exercise of reasonable diligence should have discovered the occurrence of the false, misleading, or deceptive act or practice. Tex. Bus. & Com. Code § 17.565. The limitations period may be extended for a period of 180 days if the plaintiff proves that failure timely to commence the action was caused by the defendant's knowingly engaging in conduct solely calculated to induce the plaintiff to refrain from or postpone the commencement of the action. Id.
Deceptive Trade Practices
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