Professional Documents
Culture Documents
STANDING as a consumer
Proper Standing as a consumer under the Act:
1) meet the definition of consumer- one who seeks or acquires, goods or services, by
purchase or lease
2) Defendant violated 17.50 (1-4)
i.
laundry list of prohibited actions
ii.
unconscionable actions
iii.
any breach of warranty
iv.
violation of Insurance Code 21.21
3) Defendants actions caused the consumers damages
A. WHO IS A CONSUMER?
1. Seeks/Acquires, By purchase/lease, goods or services
- was there good faith initiation
a. subjective intent to purchase
b. capacity to make the purchase
-
By purchase or lease
1) Privity is not necessary to be a consumer, consideration is not necessary
2) Incidental user are consumer if the purchase was done on their behalf (must address if
consumer harmed was not purchaser)
3) Gifts are not normally under the Act. Gratuitous services do not qualify as
seeking/acquiring (service station that changes oil for free case/ Lotto case): P will
argue that the gratuitous service was included in the price of the entire service, whereas,
the D will argue that the service was not paid for by the consumer.
Goods or services:
1) Exception: plaintiff must be either:
a) an individual consumer
b) a business consumer- a company or subsidiary with assets of $25 million or less.
(Assets are defined based on Gross assets) that purchases for biz, not
personal use
2) What are goods? Goods are tangibles, chattels, or real property &
Service is work, labor, or service
Hughes - CR
Securities are not goods or services. When specific statutory construction exists,
it supercedes the more general statute. Due Diligence defense exist to protect
advice givers.
Lotto tickets are not goods: they are only a purchase of the right to participate in
the drawing
Money & bank loans are not service/goods- (Riverside Bank v. Lewis)
Bank services (PMSIs, fin. counseling, cost of processing a loan, paying
customers monthly bills) are services. (Riverside Bank v. Lewis)
In bank cases, a P is a consumer if the basis of their complain is a good or
service (a house/auto), not the loaning of money itself.
In real estate cases, land is a tangible good (Cameron v. Terrell)
In-connection test: The defendant must have direct involvement in the transaction to form the
basis of the complaint. (Amstadt v. US Brass Corp); sufficient connection to the transaction
(i.e. dealt with consumer directly/ upstream manufacturers representations reaching the
consumer via brochures, samples, sales reps direct quotes about the goods.
-
Hughes - CR
Amstadt Test- did the upstream manufacturer put its goods/service directly into the
stream of commerce via samples, sales rep assertions, models, etc.
P- argues samples/representations created inducement vs. D- argues there was not
enough conduct by D to create an upstream connection
A producing cause is a substantial factor which brings the injury & without which the
injury would not have occurred.
17.50 (a) Ds conduct was a producing cause of economic damages or damages for
mental anguish.
The defendant does not have to knowing (with intent) violate the Act, instead they only have to
violate it (whether by accident, mistake, or negligence). (Miller v. Keyser)
Policy behind this: Act designed to offer consumers recourse that would
not be available because of the high costs to bring an action
Repairing my car
(not opinion-not covered)
Hughes - CR
GR- HDC takes a note free of claims against the assignor. Once assignment created, DTPA
claims are cut-off. When a party assigns a note to another party, the assignee becomes a HDC
provided (good faith, for value, etc.), and shielded from liability.
HDC- not subject to personal defenses (Breach of warranty), only real defenses
(Int. Harvester. V. Knight) But Texas Courts have extended liability to assignee if consumer can
prove assignees knowledge of assignor misrepresentation subject to a limit of the contracts
value. If:
1) must be inextricably interwined
2) assignee is party of the original transaction
Problem 10 /P. 129 -
Checklist:
1) Do you have a consumer?
2) Proper Defendant?
a) Is the defendant released by any of the statutory exemptions or the business consumer
exemption?
b) basis of the transaction test/ producing cause of damages
c) in-connection test
d) assignee exemption unless: intertwining & party to original transaction
3) Was the conduct a violation of the Act? (conduct under 17.50)
Hughes - CR
17.50 (a) (1) was amended to require reliance by the consumer as a prong to the
laundry list. (First Title Co. of Waco v. Garrett). There is a duty of truth imposes anything
a seller makes an affirmative representation.
SPECIFIC LAUNDRY LIST VIOLATIONS:
(5) sellers representations suggest certain condition or characteristics, quantities, uses,
benefits.
(7) sellers representations suggest certain qualities, grades, standards, style, and
model.
- does not require express or explicit representations
(4) Sales man makes sales without authority
(12) certain rights, obligations, remedies are promised but are not really available
-(Example): Landlord promises to tow non residents from assigned parking
spaces & yet no such right exists)
-illegal repossessions or foreclosures violate (12)
-when seller breaches the peace, there is a violation of (12)
-any wrongful conduct by seller will violate (12)
(19) certain guarantees or rights suggested that do not exist
-failed seed hypo
-if P tries under a Comm. Law warranty (UCC)= can only recover actual damages vs. a
DTPA claim can bring treble damages
-thus, plead DTPA claim in the alternative
-a seller can not deny or waive a warranty if it actually exists (seller tells consumer no
warranty is attached to the good, when one automatically attaches under law)
(24) deceptive silence failure to disclose when disclose would resulted in a No sale.
(Must be facts known, not facts found later)
-(Example): auto dealer knows car needs repairs but sells car to consumer without
disclosure. The Act says the consumer has reliance the consumer would not
have bought the car if he knew about any potential repairs.
-As is sales are actionable if the seller had knowledge
-fiduciary relationship is not required
B. UNCONSCIONABILITY 17.50 (2)
17.45 (5) definition of Unconscionability: an act or practice which, to the
consumers detriment, takes advantage of the lack of knowledge, ability,
experience, or capacity of the consumer to a grossly unfair degree
Hughes - CR
Amended DTPA does not require knowledge or intent for violation to exist.
(Chastain v. Koonce agent intentionally sells land without disclosing deed
restrictions defines what is gross disparity)
Intent is not required like under takes advantage prong but the degree by
which the misrepresentation is unfair (subjective test) (Latham v. Castillo
couple suing attorney for legal malpractice after their medical malpractice did
not go well).
But if the conduct is not grossly disparity, then no damages will be rewarded.
(Latham v. Castillo).
The privity rule only protects an attorney in legal malpractice cases, but not for
negligent misrepresentation actions. (McCamish, Martin v. FE Appling). Under
Texas Tort law, privity does not have to exist for attorney to be held liable. If
attorney misrepresents something, they are subject to liability
DTPA does not create warranties only the vehicle for actions. A breach of
Contract is not the same as breach of warranty (La Sara Grain v. First Nat Bank)
accountant embezzles $$$$ from co checking account because bank let him alter
signature card. Court ruled no warranty breach, only the breach of contract {terms of the
contract}).
1. UCC WARRANTIES
Express Warranty
IW of Merchantability
IW of Fitness for particular purpose
UCC- NA to real estate or professional services
Disclaimers & As Is Clauses can waive some of these warranties
Hughes - CR
Warranty claims under DTPA (treble damages- if intentional & with knowledge) vs. UCC claim
(actual damages only)
A.
B.
ordinary purposes
Seller must be a Merchant- one who holds themselves out as an expert in a
particular field or industry
No application to garage sellers or individuals
May be disclaimed with As is clauses
Remember: HYPO- AC guy selling AC units he does not normally sell or car
dealer who sells camper/truck= not a merchant
Implied warranty of fitness for particular purpose (IWFPP)1) Knows why the buyer is buying the good
2) Buyer relies on the sellers judgment
May be disclaimed by as is clause
NOTE: IWFPP (non merchants & merchants) vs. IWM (merchants only)
D. Warranty of Title- seller transfers a title that is: good, rightful, and free of
any encumbrances or liens
What if buyer buys goods and then finds out goods are subject to a security
interest? Seller violated laundry list by claiming clean title. Sellers conduct is
unconscionable- value of goods is grossly exceeded by the consideration paid.
But, best claim is for breach of warranty of title
Hughes - CR
2. CL WARRANTIES
IW of Good & Workmanlike Performance for service contracts- repairs & modifications to
pre-existing structures (Melody Homes)
IW of Good & Workmanlike Performance in construction of homes- New Homes (Humber
v. Morton)
IW of Habitability- new homes must be fit to live in
IW of Suitability- Is premise fit for commercial purpose?
Any contract for repair or modification of existing tangible goods gives rise to a
warranty that the service will be performed in a good & workmanlike manner.
2.
Test: quality of work performed by one who has the knowledge, training, or
experience necessary for the successful practice of a trade or occupation and
performed in a manner generally considered proficient by those capable of
judging such work
3.
Hughes - CR
2.
3.
a.
b.
WHEREAS:
If the service (Yellow Pages ad) has been delivered and accepted and do not comfort
with buyers expectations, there is a breach of warranty. (SW Bell v. FDP Corp)
Economic
Damages
The Court can order alternative forms of recovery other than economic damages.
(injunctive relief, rescission, restitution, etc.)
Any DTPA
Violation =
Economic
damages
Hughes - CR
Economic damages compensatory damages for pecuniary loss. More narrow than
actual damages. Excludes mental anguish, pain & suffering. Recoverable when a violation
occurs
Consumers are allowed to recover under whichever measure of damages that give them
the greatest recovery. (Woo v. Great SW Acceptance Corp)
1) Reasonable
2) Based on a dollar amount and not a percentage of the recovery
3) Defendant may recover if claim was groundless, in bad faith, or as harassment
Tie-In Statute without Knowledge = actual damages (including pain & suffering)
Tie-In Statute violation with Knowledge = 3 x actual damages
Hughes - CR
10
A. Economic Damages:
P does not have to suffer actual damages to recover (Luna v. North Star Dodge Sales)
breach alone is enough for DTPA claim
When seller fails to disclose a defect, they subject themselves to treble damages (Mahan
Volkswagen v. Hall)
B. Mental Anguish damage recovery: (must be Knowingly)
Must go beyond mere disappointment (Parkway Co. v. Woodruff). Proof of high degree
of emotional damage required
In legal malpractice cases, P does not have to prove they would have won case to
recovery for mental anguish (Latham v. Castillo).
A party may recover mental anguish damages under economic damages if anguish is a
direct result of the violation vs. if mental anguish is incidental to violation then
knowledge is required. ( Douglas v. Delp).
C. Treble damages: 3 x all economic damages when defendant acted with knowledge.
Trier of fact will set damages Example: Court awards E= $1,000 (Min. $1,000 Max.
$3,000)
Can a court award treble damages if the P fails to request them:
Pre 1995- YES- it was automatic (Martin v. McKee Realtors)
Post 1995- NO- failure to request is a Waiver
D. Tie-in Statutes:
Tie-In Statute is: a state statute that incorporates the provisions of the DPTA, and
makes a violation of the statute a violation of the DPTA. DPTA actions brought
through a tie-in statute entitle the consumer to recover actual damages rather than
economic damages.
Tie In Damages:
1) if only a violation= 3 x actual damages
2) if violation with knowledge= treble damages
Examples: Health Spa Law, Wrongful Debt Collection Act, & Home Solicitation Sales
Act
E. Attorneys fees:
Hughes - CR
REASO
NABLE &
NECESSARY
Not % of
recovery
11
must be reasonable and necessary and based on set dollar amount, not as percentage of
recovery (Arthur Andersen v. Perry Equipment)
Factors in determining reasonable AF:
1. Time & labor required
2. likelihood that employment in this case will preclude employment in
other cases
3. the usual fee for a similar case
4. amount involved and results obtained
5. time limitations imposed by client
6. nature of the relationship with the client
7. lawyers experience in a given legal area
8. whether the fee is fixed or contingent
How does the court decide reasonable AFs: (King v. Wal-mart)- Federal vs. State
approaches to calculating AFs: Use this model:
1) Work the Fed. Approach:
a. hours x reasonable hourly fee= LODESTAR
b. adjust for the 8 factors (from Andersen case)court must consider each factor individually
2) State Approach:
a. Reasonable & necessary fees X hours
b. Subject to settlement limitations
ANSWER: the court will split the difference btw AF (f) & AF (s)
F. Cumulative Recovery1. 2 separate actions violating 2 different laws creates 2 different injuries =
recovery under each law + exemplary damages.
- Action 1, Harm 1 = damages & penalties under both
Action 2, Harm 2
-Example: if there is a tie-In statute
Hughes - CR
12
-HYPO: Best Buy sells consumer TV & lies about the quality of TV, then
charges consumer higher than normal interest rate. (2 violations + 2
recoveries)
2. 1 action violates 2 different laws = pick one of the violations to recover
under
- DTPA violation 1 (laundry list), Harm 1
HYPOS:
1) Insurance violation + laundry list violation= damages under 1 + penalties under both
statutes
2) Misrepresentation claim under DTPA + contract violation = 2 separate laws & 2
separate recoveries
3) Best Buy sells defective TV:
a. strict liability- only if there is damage to other property (house burns down)
b. Best Buy knew about the defect- laundry list violation
c. IWM under UCC
d. IWM DTPA
ANSWER: A) if only TV damaged = 1 harm/ 1 recovery
B) Defective TV causes fire that burns down house: opens door to strict liability
& breach of warranty = 2 harms/ 2 recoveries
VI. DEFENSES
A. Statutory Defenses - affirmative defenses
1. No reliance by consumer on Ds behavior under laundry list + IWFPP
2. Business Consumer exemption
3. SOL: based on when known or should have known (2 years) reasonable discovery rule
applies
4. Professional Services (advice givers & media ads) under 17.49
5. Rejected Settlement Limitations limits amount of damages & AF awarded
6. Waiver under 17.42- specify language & represented by attorney
Hughes - CR
13
Hughes - CR
2.
3.
14
15
Selling the mineral rights later, is a breach of warranty, if told buyer they were included.
(Alvarado v. Bolton)
8. Texas courts will enforce Forum selection clauses
- Texas consumers may reach out of state & foreign defendants with the long arm
statute. Parties doing business in Texas can not waive applicability of the DPTA
Texas Courts will enforce forum selection clauses provided the clause is: (Effron v.
Sun Line Cruises)
1. Reasonable
2. Fair
- However, if consumer did not view the forum selection clause (via brochure, ad, etc.)
before making the purchase, the forum selection clause can be unenforceable.
(Stonbaugh v. Norwegian Cruise Line)
DTPA Defenses & claim resolution
A. Notice (demand letter)
17.505- notice must be given by P before claim is filed:
notice must include:
a) damages & expenses
b) attorneys fees
c) specific cause of action
If P fails to send a demand letter- upon a defendants motion, the court will abate the
claim for 60 days. During the abatement period, the defense attorney does not have to
answer the original petition.
Motion for abatement: Once case has commenced, the defendant has 30 days to file
motion for abatement. 17.505(c)
Failure by P to give notice within the 60 day abatement period will result is dismissal.
Effect of Ps Rejection of a settlement offer can hurt you if damages awarded are not
significantly higher than settlement offer. (See 17.5052 (f))
Attorneys Fees
B. OFFERS OF SETTLEMENT
Hughes - CR
42 defines
substantially
the same as
80% of
settlement
offer
settlement offer
$ 3000
$ 500
award
$2500
$15,000
Dealership
2. Vertical privity
Hughes - CR
17
Pappasitos
Soup Rus
Campells Soup
Remote mfr can not be sued under 402A (Nobility Homes v. Shivers) 402A
applies to personal injuries, not economic losses like (cost of replacement or
cost or repair).
If injury is only to the goods (itself), the cause is under IW of Merchantability,
not 402A. But if the defective product caused damages to other property then
402A would apply.
402A can not recovery for economic injury
vs.
UCC doesnt state privity is not required- 2-318 of UCC of Texas remains
neutral but CT says no privity
Express Warranty claims require privity (Texas Processed Plastics v. Gray).
This was more of a contractual relationship, so claim should be under contract
law.
Mid-Continent v. Curry- (SC decision) as is sold malfunctioning airplane
caused damage to itself alone (no damage to person or other property). Ct says
this is not strict liability issue because the only damage was the defective
product itself. To apply 402A would be extending tort law into contract law too
much. Dissenting opinion says damages are damages, whats the difference?
2. Was the As is disclaimer valid (since this was a breach of warranty under
contract case)?
- as is clause was enough to destroy the implied warranties (not express
warranties)
- As is clauses are effective to disclaim implied warranties of FPP &
Merchantability, but as is clauses can not destroy laundry list or
unconscionability violations.
- If plane caused PI to pilot or other property, strict liability would apply
because warranties can not be disclaimed under strict liability.
Vs.
- damage to the plane itself is not strict liability; instead the cause would rest
in UCC breach of warranty breach alone.
Hughes - CR
18