Texas Bar Exam Essays - Consumer Law
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What does DTPA stand for?”
Deceptive Trade Practices Act. It’s essentially about transactions that involve false, misleading, or deceptive trade practices.
How do courts generally construe the DTPA?
The DTPA is liberally construed to protect consumers and generally may NOT be waived.
Can the DTPA be waived by a consumer?
- Generally, the DTPA may NOT be waived! Can only be waived it:
- (1) in writing and signed by consumer who
- (2) is not in a significantly disparate bargaining position; and
- (3) consumer is represented by legal counsel in seeking or acquiring goods/services
Who may bring suit under the DTPA?
A consumer is the only entity that may bring a private cause of action under the DTPA. A consumer is (1) an entity (2) who seeks or acquires by purchase or lease (3) any goods or services.
Who is a “consumer”?
- (1) individuals
- (2) P/S
- (3) Corporations
- (4) This state
- (5) Subdivision or agency of this state
What is the definition of “acquire”?
Any purchaser acquires, as does any intended beneficiary, but an incidental beneficiary does not acquire.
- People who do NOT “acquire”, include:
- (1) passenger riding in car is not a consumer with to car
- (2) friend who borrows goods not consumer with respect to the goods
- (3) fiancé of a consumer is not a consumer with respect to goods purchased by consumer
- (4) employee who occasionally uses goods not a consumer with respect to goods.
- People who DO acquire include:
- (1) tenants with respect to services purchased by landlord
- (2) employees with respect to goods purchased by employer
- (3) purchaser of property with respect to an inspection paid for by the seller
Does the DTPA exclude goods or services that were free?
The DTPA excludes truly free services, BUT a consumer does not have to be the one who pays in order to be covered under the DTPA. The test is “did the person claiming to be a consumer acquire the goods or services through a purchase?”
When is a business NOT a consumer under the DTPA?
A business consumer with assets of $25MM or more, or one that is owned or controlled by an entity with assets of $25MM or more is NOT a consumer under the DTPA.
Defendant has the burden of proof to prove the business consumer exception as an affirmative defense.
Are there any statutory exemptions from DTPA coverage?
- Yes, the STPA provides a list of conduct exempt from the provisions of the Act:
- (1) professional services
- a. exempts doctors, lawyers, accountants, architects, and engineers
- b. Exemption does NOT apply if:
- i. Express misrepresentation of a material fact which is not advice, opinion, or judgment
- ii. Failure to disclose information
- iii. Unconscionable action or course of action which is not advice, opinion, or judgment
- iv. b/ express warranty not characterized as advice, judgment, opinion
- (2) personal injury claims
- a. You can recover PI damages only if “tie-in” statute or “knowingly” conduct found (otherwise, PI causes of action are exempted)
- b. Economic damage and damages for mental anguish arising out of PI and for violation of a tie-in statute ARE recoverable
- (3) large transactions
- a. DTPA doesn’t apply to written contracts involving consideration of $100K+ if consumer is represented by an attorney and the transaction; DOES NOT involve the consumer’s house
- b. DTPA does not apply to contracts (oral or written) involving consideration of $500K+; DOES NOT involve the consumer’s house (regardless as to whether consumer had an attorney)
Who may be sued under the DTPA?
A consumer may sue anyone who violates the DTPA if the transaction is the basis of the consumer’s complaint BUT the act complained of must occur “in connection with” the transaction.
“In connection with” Test = did the misrepresentation (or other DTPA violation) reach the consumer directly? If so, then it was in connection with the transaction; if no, then not.
What are the different types of claims under the DTPA?
- There are 4 separate claims that may be brought under the DTPA:
- (1) the use or employment by any person of a false, misleading, or deceptive act or practice that is:
- a. specifically enumerated in 17.46(b) (laundry list); and
- i. The three most common laundry list violations include (i) general misrepresentations, (ii) misrepresentations regarding legal rights (other than contract interpretations), and (iii) failure to disclose (requires intent; no need for special relationship)
- b. relied on by a consumer to the consumer’s detriment
- (2) breach of (i) express or (ii) implied warranty (created by statute or common law)
- a. Note: warranties can be validly disclaimed
- (3) any unconscionable action or course of action by any person
- a. Objective standard; grossly unfair; consumer taken advantage of based on “disability” as compared to seller.
- (4) the use or employment by any person of an act or practice in violation of the Insurance Code Act 21.21
- a. Insurance is a service; this is not a tie-in statute; Any 541 violation is actionable by a consumer as a violation of the DTPA
What are defenses to DTPA claims?
- (1) Note: Common law defenses do NOT apply
- (2) Negate causation
- (3) Compelled mediation
- (4) Arbitration clauses
What is the procedure for filing a DTPA claim?
- Unless filed as a counter-claim, consumer must give at least 60 days written notice w/
- (1) nature of complaint
- (2) amount of damages
- (3) amount of attys fees
If a class action, may give notice for a class.
What is required for a settlement offer?
A defendant may propose a settlement to an individual or a class.
Defendant has 60 days from receipt of notice or 90 days after answer to propose a settlement offer.
- Any settlement offer must include
- (1) an amount of money or other consideration as settlement of consumer’s damages, and
- (2) an amount of money to compensate the consumer his reasonable attorneys fees incurred up to the offer date
What is the remedy if a consumer fails to give a defendant 60 days notice before filing a lawsuit?
Abatement to allow notice.
What must a defendant do if he offers to settle in kind?
He must reduce the offer to a cash value.
What is a the result if a consumer rejects a settlement offer?
Rejection of a reasonable settlement offer precludes punitive damages and also limits a consumer’s attorney’s fees if offer was the same, substantially the same, or more than the damages found by the trier of fact, consumer may not recover an amount in excess of the lesser of (i) the amount of damages in the settlement offer, or (ii) amount of damages found by the trier of fact.
How long does a consumer have to bring a DTPA claim?
DTPA actions must be commenced within 2 years from the date on which the false, misleading, or deceptive act or practice occurred; or within 2 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.
What is the amount of damages allowed under the DTPA?
In order to be liable, the defendant only need to have been a PRODUCING CAUSE (not necessarily the proximate cause, so this is the lowest standard in Texas).
- Damages are as follows:
- (1) Generally, only economic damages are allowed
- (2) If act was knowing (knew of act) = 3x (treble) economic damages + mental anguish
- (3) If act was intentional (desired act or had substantial certainty) = 3x economic damages and 3x mental anguish
- (4) If act was knowingly and violation occurs under a tie-in statute = 3x actual damages
Plaintiff must also be awarded costs and reasonable attorney’s fees – contingency agreements not binding on court; must show reasonableness of attorney’s fees.
If court finds that the action was groundless, brought in bad faith, or brought for purposes of harassment, in which case the court SHALL award defendant’s costs and attorney’s fees.
Who is a debt collector under the Federal Debt Collection?
This act applies only to Third Party Collectors (or those who appear to be third party collectors).
This act only applies only to consumer debts (personal, family, or household purposes).
A debt collector is any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts or who regularly collects or attempts to collect, directly or indirectly, debts owed or asserted to be owed or due to another.
What is a validation of debt?
In the initial communication (or within 5 days of such), the debt collector must tell the consumer that he has 30 days to dispute the debt. If the debt is disputed, then ALL debt collection activities must cease until the debt is verified.
What types of communications are prohibited by debt collectors?
- (1) Time/place of phone calls – only between 8am and 9pm
- (2) Represented by attorney – can’t communicate if collector knows atty represents consumer (unless the atty gives permission)
- (3) Work/place of employment – can’t communicate if collector knows employer prohibits calls
- (4) 3rd Parties – can’t communicate with 3rd parties (unless trying to obtain location information of debtor)
What type of conduct is prohibited?
- (1) Harassment/abuse
- (2) False/misleading representations
- (3) Unfair/unconscionable practices
How can the FDCPA be enforced? What is the statute of limitations?
Either through a private cause of action of administratively. The statute of limitations is one year. Violations of the FDCPA also violate that DTPA.
What types of damages are available under the FDCPA?
- (1) Private enforcement – actual damages + $1K punitive/statutory damages
- (2) Class action - <$500K or 1% of net worth of debt collector
Note: Plaintiff also gets costs and atty’s fees (unless case brought in bad faith, in which case defendant gets costs and atty’s fees).
What are some differences between the FDCPA and the TXDCPA?
- (1) Under the Texas DCPA, the definition of debt collector includes the original creditor as well as 3rd party collectors
- (2) Under the Texas DCPA, a violation is a misdemeanor with a fine of $100 to $500 for each violation (and, of course, there can be a civil suit as well).
What conduct is prohibited under the TX DCPA?
The following is an EXCLUSIVE list in Texas:
- (1) Threats/coercion
- (2) Harassment/abuse
- (3) Unfair/unconscionable conduct – limited only to attempting to collect amounts not authorized
- (4) Fraudulent, deceptive, misleading representation
- (5) Use of an independent debt collector who you know engages in these types of violations.
What is the minimum recovery under the Texas DCPA, and what is the recovery for?
- There is a minimum recovery of $100 for
- (1) failure to maintain a bond
- (2) failure to properly review accuracy of information in a file
- (3) or the use of threats or coercion.
What are some common DTPA tie-in statutes?
- (1) Business Opportunity Act – seller promises to sell a buyer goods to start a business
- (2) Contest and Giveaway Act – to get consumer to attend an event
- (3) Debt Collection Act – 3 days to rescind
- (4) Health Spa Act – 3 days to rescind
- (5) Home Solicitation Act (i.e. door-to-door sales) – 3 days to rescind
- (6) Credit Services Organizations – credit repair services
- (7) Removal of Unauthorized Vehicles from Parking Facility – towing statute
- (8) Rental-to-Own Agreements
- (9) Manufactured Housing Standards Act
- (10) Motor Vehicle Commission Code (lemmon law)
- (11) Timeshare Act (interest in land, 6 days to rescind)
- (12) Telephone Solicitation – prohibits unsolicited phone calls and faxes
- (13) Representation as Attorney – prohibits notary public from holding herself out as an attorney.
When a tie-in statute is involved, what claims can a consumer bring, and what should be addressed on the bar exam?
- 3 Claims Under Tie-in:
- (1) Tie-in statute by itself
- (2) DTPA by itself, and
- (3) DTPA/tie-in claims
What is the Texas Insurance Code?
Article 21.21 protects against unfair and deceptive acts or practices in the business of insurance; applies to any person; protects insurance companies from anti-competitive acts.
What are some unfair methods of competition and deception?
- (1) misrepresentation and false advertising of policy contracts
- (2) defamation against competitors
- (3) unfair discrimination
- (4) deceptive name, word, symbol, device, or slogan
- (5) unfair settlement practices – failing to attempt in good faith, to effectuate a prompt, fair, and equitable settlement with the insured when liability is reasonable.
- (6) Misrepresentation of insurance policy
What types of damages are available under the Texas Insurance Code?
- (1) Actual damages + court costs + reasonable attys fees
- (2) If conduct was knowing, then treble 3x actual damages
What is the statute of limitations under the insurance code?
It is the same as the DTPA – 2 years
What is a defendant’s remedy if the plaintiff fails to give 60 days notice that they are going to bring a claim under the insurance code?
File a plea in abatement (same as the DTPA).
Is it a violation for an insurer to wrongfully demand tax returns?
What does Chapter 542 of the Insurance Code deal with?
- Prompt Payment of Claims
- (1) Insurer must respond within to claim not later than 15th day after receipt (or 30th business day if the insurer is an eligible surplus lines insurer)
- (2) Must accept/reject claim within 15 days (but can extend for up to 45 additional days)
- (3) If insurer fails to accept or reject, subject to penalty
- (4) Once a claim is accepted, insurer must pay within 5 days or be subject to a penalty
- (5) Damages: amount of claim + 18% per annum of amount of such claims + atty’s fees
Do insurers have a duty to act in good faith? What type of claim may be brought if an insurer acts in bad faith?
Yes, must act in good faith. This is a tort; not a statutory cause of action.
What is the Stowers Doctrine?
The Stowers problem is where the insured gets sued for more than the policy limits, and to the insurance company, there is no incentive not to litigate because regardless of what happens they are only liable for the policy limits. If a claimant offers to settle for policy limits when liability is reasonably clear, the insurer has a duty to settle. Wrongful duty to settle violates the duty of good faith.
If insurer engages in a wrongful refusal to settle, then it will be liable for ALL damages, even any amount awarded over and above the policy limits.
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