Transcript HF 712 A Private Right of Action for Consumer Fraud

Iowa Code Ch. 714H
The Private Right of Action for
Consumer Frauds Act
Bill Brauch
Special Assistant Attorney General
Director- Consumer Protection Division
Iowa Department of Justice
The Cause of Action
• Section 714H.5.
• Consumer who “suffers an ascertainable loss of
money or property” as a result of a prohibited
practice or act may bring an action at law to
recover actual damages.
• If consumer prevails in the claim and is awarded
actual damages, the consumer’s attorney must
be awarded attorney fees and consumer must
be awarded costs.
What the Law Covers
• The advertisement, sale or lease of consumer
merchandise or the solicitation of contributions
for charitable purposes.
• Consumer merchandise includes any objects,
wares, goods, commodities, intangibles,
securities, bonds, debentures, stocks, real
estate or services offered for sale or lease, or
sold or leased, primarily for personal, family, or
household purposes.
What the Law Covers – Definitions
per 714H.2
• “Advertisement” means the attempt by
publication, dissemination, solicitation or
circulation to induce directly or indirectly any
person to enter into any obligation or acquire
any title or interest in any merchandise.
• A “consumer” is a natural person or the person’s
legal representative. “Person” is very broadly
defined – see section 714.16(1)(j).
• “Sale” means any sale or offer for sale of
consumer merchandise for cash or credit.
Prohibited Practices – General
Conduct – 714H.3
• An act or practice the person knows or
reasonably should know is:
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An unfair practice;
Deception;
Fraud;
False pretense;
False promise; or,
The misrepresentation, concealment,
suppression, or omission of material fact
all with the intent that others rely upon any of these.
Prohibited Practices – General
Conduct – 714H.3
• “Deception” means an act or practice that
is likely to mislead a substantial number of
consumers about a material fact or facts.
• “Unfair Practice” means an act or practice
which causes substantial, unavoidable
injury to consumers that is not outweighed
by any consumer or competitive benefits
which the practice produces.
Prohibited Practices – General
Conduct – 714H.3
• All must be committed in connection with
the sale, lease or advertisement of
consumer merchandise or the solicitation
of contributions for a charitable purpose.
• All require the party bringing the claim to
prove that the prohibited practice related
to a material fact or facts.
Prohibited Practices – Some Per se
Violations – 714H.3
All of the following are violations and none require
proving that the person knows or reasonably should
know the conduct was deceptive, etc., or proof that
the conduct related to a material fact or facts:
-- Section 321.69 (Auto Damage Disclosure)
-- Chapter 516D (Auto Rental Car Practices)
-- Sections 516E.5, 516E.9, 516E.10 (Auto Service
Contracts)
-- Chapter 555A (Door to Door Sales)
-- Section 714.16(2)(k) – (relating to auto repairs)
-- Section 714.16(2)(l) – (relating to use of
aftermarket parts in auto repairs)
Remedies – 714H.5
• “Actual damages” means all compensatory
damages proximately caused by the
prohibited practice or act that are
reasonably ascertainable in amount, but
does not include damages for bodily injury,
pain and suffering, mental distress, or loss
of consortium, loss of life, or loss of
enjoyment of life.
Remedies – 714H.5
• Includes discretionary punitive damages awards
of up to 3 times actual damages in instances
where the defendant’s conduct constitutes willful
and wanton disregard for the rights or safety of
another.
• Court may order equitable relief it deems
necessary to protect public from further
violations, including temporary and permanent
injunctive relief.
Remedies – 714H.5
• Reasonable Attorney Fees
– Mandatory to prevailing consumer’s attorney.
– Determined by value of time reasonably
expended including but not limited to
application of 12 listed factors derived from
civil rights litigation, and relied on by courts in
other states in private consumer fraud
actions. (IA is only state with this in statute.)
Remedies – 714H.5
• Burden of proof = preponderance.
• Statute of limitations = brought within the
latter of two years of the occurrence of the
last event giving rise to the cause of action
or two years of the discovery of the
violation by the person bringing the cause
of action.
• Does not affect claimant’s right to seek
relief under any other theory of law.
Defenses and Limitations –
714H.5
• Law only applies to causes of action
accruing on or after the effective date of
the Act.
• Bona fide error defense: no liability if
defendant shows by preponderance that
violation was not intentional and resulted
from a bona fide error notwithstanding the
maintenance of procedures reasonably
adopted to avoid the error.
Complete Exclusions
• Solicitations of charitable contributions on behalf
of political organizations or religious
organizations, as defined in chapter 13C.
• Solicitations of charitable contributions made on
behalf of a state, regionally, or nationally
accredited college or university, or on behalf of a
nonprofit foundation benefiting such college or
University subject to IRS § 509(a)(1) or (3).
Complete Exclusions
• In actions relating to charitable
solicitations, unpaid, uncompensated
volunteers who receive no monetary gain.
• Local exchange carrier telephone service.
• Gas and electric utilities.
• Cable TV or video service pursuant to a
franchise under sections 364.2 or 477A.2
Complete Exclusions
-- Corporations holding one or more
industrial loan or regulated loan licenses
employing fewer than 60 full time
employees.
Exclusions of
Professions/Businesses
• Merchandise offered or sold by any of the
following pursuant to a profession or
business for which they are licensed or
registered, including their business
entities, officers, directors, employees or
agents:
– Insurance companies and agents
– Attorneys
Exclusions of
Professions/Businesses
-- Health related professions and facilities,
including: hospitals, health care facilities,
hospice programs, physicians and surgeons,
osteopathic physicians and surgeons, physical
therapists, occupational therapists, physician
assistants, podiatrists, chiropractors, nurses,
dieticians, respiratory care practitioners and
therapists, dentists, optometrists, psychologists,
pharmacists, social workers and behavioral
therapists.
Exclusions of
Professions/Businesses
-- Certain other licensed professionals:
– Veterinarians
– Public accountants
– Engineers
– Architects
– Landscape architects
– Real estate brokers
– Funeral directors
Exclusions of
Professions/Businesses
-- Certain financial institutions, including:
– Federal and state-chartered banks.
– Federal and state-regulated savings and loan
associations or savings banks.
– Credit unions organized under state or federal
law.
+ Any affiliate or subsidiary of the above
Only excluded for acts within the scope of
the license!
General Exemptions
• Retailer ads prepared by product suppliers,
other than involving health-related claims.
• The media, regarding advertisements appearing
therein or thereon.
• Advertising that complies with the statutes, rules
and regulations of the FTC.
• Conduct required or permitted by rules of, or
statutes administered by, a federal, state or local
governmental agency.
General Exemptions
• An affirmative act which violates ch. 714H
but is specifically required by other
applicable law, to the extent that the actor
could not reasonably avoid violating ch.
714H.
• Exemption from “material fact” for certain
repairs to “new merchandise” unless
retailer fails to post a sign about disclosing
repairs or the consumer asks about them.
Class Actions – 714H.7
• Must be approved by IA AG before being
filed.
• AG must approve unless AG determines
that the lawsuit is frivolous.
• Does not affect requirements of any other
law or of the Iowa Rules of Civil Procedure
relating to class action lawsuits.
Notification to AG – 714H.6
• Applies to all petitions, counterclaims, crosspetitions, or pleadings in intervention alleging a
violation.
• Must send copy of pleading to AG within 7 days
of filing and within 7 days of any final judgment
in the action send AG copy of that judgment.
• Party appealing small claims order or judgment
to district court involving an issue raised under
ch. 714H must notify AG in writing and send
copies of pleadings and order or judgment being
appealed, all within 7 days of notice of appeal.
Notification to AG – 714H.6
• Party appealing a district court order or
judgment involving an issue raised under
ch. 714H must notify AG in writing and
send copies of pleadings and order or
judgment being appealed, all within 7 days
of filing notice of appeal.
Notification to AG – 714H.6
• All notices and other documents required to be
sent to AG must be sent by certified mail unless
AG has previously been provided copies of
pleadings, orders, judgments or notices in the
same action by certified mail, in which case
subsequent mailings may be by regular mail.
• Failure to provide mailings to AG is grounds for
subsequent action by AG to vacate or modify the
judgment.
AG Right to Intervene– 714H.6
• AG may intervene as a party at any time
or may be heard at any time, upon timely
application to court.
• AG’s decision not to intervene does not
preclude AG from bringing a separate
enforcement action.
Ch. 714H – Statistics
(to the best of AG’s knowledge)
• Number of actions filed: Roughly 80*
• # on appeal: 1 (Scenic Builders, LLC v.
Ron & Julie Peiffer) – decided 5-25-11
• # in which AG intervened: 0
• # of class actions filed: 6
• # cases filed in small claims: 12
• # cases in federal court: 2
* We know of 48, but are told there are about 30 others
Cases Filed Thus Far
(to the best of AG’s knowledge)
• Ron Dougherty v. Fast Action Auto (Polk County –
used auto debt collection and contract issues)
• Justin & Lindy Fox v. Alan Meyer Enterprises, L.C.
(Linn County – alleged misrepresentation of real estate
lot size and upgrade costs)
• Audrey McKnight v. Holmes Hyundai Inc. (Polk
County – alleged misrepresentation to auto buyer of right
to cancel deal and return vehicle)
 Erin & Amber Menzer v. Riverside Rentals (Johnson
County – Landlord-Tenant issue – unit allegedly
uninhabitable due to mold)
 Ted Sulgrove v. Stephen Schroeder dba
Guaranteed Auto Sales (Polk County – Used car
buyer sued defunct dealership and auto bond provider
for failure to pay government fees and pay off loan)
 Dustin Onstot v. Extreme Auto Plaza, Inc. (Polk
County – allegedly unfair debt collection/repo
practices)
 Harla Jean Peck v. R.S. Auto Incorporated
(Jefferson County – alleged used car odometer fraud)
 Kathy Escher v. Bill LeGrand, Jr. and Better
Bodies of Iowa (Johnson County Small Claims –
alleged refusal to make refunds for unused personal
training)
 Scenic Builders, LLC v. Ron & Julie Peiffer
(Allamakee County – counterclaim in home
construction contract litigation for alleged altering of
preliminary estimate and whether, in fact, homeowners
contracted with company)
 Sean & Julie Beard, Jody Weigel, Michael &
Deanna Riley v. Toyota Motor Sales, USA (US Dist.
Ct., SDIA, Davenport Div. - Class action lawsuit (1st
under 714H) re unintended acceleration)
 Donald Peterson, by Susan Peterson-Moulder, his
Guardian, v. Cottage Grove Place, Inc. and Life
Care Services, LLC (Linn County – Class action
lawsuit re “memory care” unit of facility that had no
license to offer such)
 Residents of Elsie Mason Manor & Ligutti Tower,
Katherine Daniel et al v. First Baptist Housing
Foundation and American Baptist Homes of The
Midwest, dba Elsie Mason Manor & Ligutti Tower
(Polk County – Class action lawsuit regarding housing
conditions of senior citizen facility – bed bugs)
 Richard Thomas and Rosalie Thomas, his wife, v.
Advanced Bionics (California State Court – LA County
– action against manufacturer of cochlear implants with
alleged moisture-caused defects)
 Jerry Saylor dba Saylor Properties v Frankie Lynn
Argenal (Polk County – Counterclaim relating to alleged
undisclosed mobile home defects)
 Robert W. & Jennifer C. Welsch v. Abby's One True
Gift Adoptions (Dallas County – alleged
misrepresentations in connection with an adoption that
was attempted to be arranged via defendant)
 Culligan Water Conditioning Ida Grove, IA v. Derek
& Kathleen Schroeder (Monona County –
counterclaim by consumers alleging various debt
collection practices were unfair)
 John Kier v. Lake Manawa Nissan, Inc.
(Pottawattamie County – alleges deceptive advertising
of credit terms by dealer in connection with used car
sale)
 Nimrod Deering v. Thomas Ballard (Polk County
Small Claims – plaintiff homeowner alleges defendant
failed to install new windows per contract after taking
$2000 down from plaintiff)
 Professional Solutions Financial Services v.
Lifetime Dental and Roberta L. Ekman (Polk County
– counterclaim alleges misrepresentation by firm that
marketed patient waiting area TV/Computer systems
displaying healthcare info via lease agreements – to
be offset by payments to plaintiff that didn’t
materialize)
 Brandon Simpson v. Thomas Moberg (Polk County
Small Claims – alleged deception in Craigslist ad for
swimming pool filter system – delivered different
model than one advertised as sold for $800-1500 –
different system sold to plaintiff for $400 goes for $129
- $212)
 Laura Lake v. Sinclair Oil Corp. (Woodbury County
Small Claims -- $4400 sought for alleged placement by
defendant in water in gasoline sold at retail)
 John Robert Randall v. Heather Woodhouse (Linn
County – Counterclaim – IA Legal Aid – LL-T claim
alleging nondisclosure and unfair practices re bad
housing conditions)
 James & Diane Jessen v. Anthony Althiser
(Crawford County – alleging home improvement
contractor took $14000, did no work, and didn’t return)
 Brittney Ketelsen v. Jason Delaney, Delaney’s
Auto Center and Repair (Dubuque County, alleges
charging for unapproved & unnecessary auto repairs)
Russell Trimble v. Phil Marshall (Iowa County –
alleged charges for work not done, or done quite poorly,
on plaintiff’s cabin)
 Peggie Prentice v. South End Used Cars (Fayette
County – alleged deceptive used car sales practices)
 Cassandra Cory v. Dubuque Extended Stay Hotel
(Dubuque County – hotel bedbugs)
 William Burt v. Oakview Terrace, L.P. & Conlin
Properties, Inc. ( Polk County, rental housing bedbugs)
 Kelil Haun, et al., v. Perry Comeau, et al., (Fayette
County Class Action – alleges pain clinic patients
incurred harmful, unnecessary treatment by registered
nurses not acting under physician supervision)
 Maureen Rogers v. Flobridge Group, LLC, dba
Flowbridge.com & Mainstreamloansonline.com
(Polk County – alleges unfair debt collection practices in
connection with Internet payday loans)
 Mae Bryant v. King’s Kars (Linn County Small
Claims – alleges unfair used car sale practices)
 Margaret Marsh v. Budget Auto Sales, Inc.
(Pottawattamie County Small Claims -- alleges unfair
repossession practices)
 Alejandro Rodriguez v. American Home
Improvements (Cerro Gordo Small Claims – alleges
misreps in connection with home improvements)
 Guy Blume v. American Dairy Queen (US District
Court for SD of Iowa – alleges deceptive and unfair
franchisor practices)
 Dogwood Automobiles, et al., v. Healey Werks,
LLC and Craig Hillinger, and Shari Hillinger
(Woodbury County – alleges misreps in connection with
restorations of Ferraris)
 Debra Miller & Roy Miles v. Fisbeck Enterprises,
LLC (Pottawattamie County – alleges misreps of corp.
affiliation in sale of home construction services)
 Leon Stitts v. Shane Flaherty and Ashley Flaherty
(Cerro Gordo County Small Claims – alleged LandlordTenant violations)
Butts, Trevino, Ramsey, Williams, et al., v. Iowa
Health System & Central Iowa Hospital Corp.
(Polk County Class Action – alleged unfair practices for
charging cash-paying patients higher prices than those
covered by insurance or government benefits)
Grief v. Custom Crafted Homes (Jones County District
Court – alleged false statements by contractor about
having paid subcontractors)
 Keller v. American Laser Centers (Blackhawk County
– alleged unfair practices re hair removal services)
 McClarin v. Autodrive, Inc. (Webster County – small
claims – allegations unknown – appears to be a used
car sale case)
Betty Hoenighausen vs North Linn Ford, Inc. d/b/a
Junge Center Point (Linn County – demonstrator car
allegedly sold as new)
Vida E. Langguth, Kathy Lee Sankey & Jon Dale
Kouba, as co-trustees of the Vida E. Langguth Trust,
vs Thomas A. Oberbroeckling (Linn County – alleged
fraud relating to financial advice)
 Thomas K. & Jeanne M. Wagner vs Horizon
Custom Builders (Polk County – alleged faulty home
construction)
 Larry Brown vs Steven L. Nelson (Polk County –
alleged non-disclosure of defects in sale of home)
 Queck Properties vs Corine Mihalakis (Dubuque
County – Small claims – allegations unknown to AGO)
 Gansen Yard Design d/b/a James P. Gansen vs
Jacqueline L. Herrig (Dubuque County – Small Claims
– Home improvement fraud counterclaim)
 Todd Crowley & Jennifer Crowley vs Phillip Drish,
Tammy Drish, Myron Greiner & Greiner Real Estate
and Auction (Keokuk County – alleged
misrepresentation of basement and foundation problems
in sale of existing home)