Consumer Law

Front 1

Texas Deceptive Trade Practices Act

How is it construed?

To whom does it apply?

Is waiver permitted?

Back 1

The DTPA is liberally construed.

It applies to and is intended to protect consumers.

Generally, it may not be waived.

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When is waiver of the DTPA permitted?

Back 2

With only a few exceptions, any waiver of the DTPA is contrary to public policy, unenforceable and void. Act may be waived only if:

(1) Waiver is in writing and signed by the consumer.

(2) Consumer is not in a significantly disparate bargaining position; and

(3) Consumer is represented by legal counsel in seeking or acquiring goods or services.

Questions about waiver are increasingly common, but they only want you to say "waiver is void because... (list failure to meet above exceptions)"

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Key terminology

"Consumer"

Back 3

A consumer is the only entity that may maintain a private cause of action under the DTPA.

Front 4

Key terminology

"Business consumer"

Back 4

Included as a consumer unless one holds MORE THAN $25,000,000 in assets.

Front 5

Key terminology

"Goods"

Back 5

Includes real estate, excludes merely lending money.

Front 6

Key terminology

"Services"

Back 6

It does NOT include merely lending money.

Front 7

Key terminology

"Knowingly"

Back 7

Required to prove mental anguish damages and up to three times economic damages.

Front 8

Key terminology

"Intentionality"

Back 8

Required for up to three times mental anguish damages.

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Key terminology

"Economic damages"

Back 9

The DTPA's general damage standard.

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Key terminology

"Actual damages"

Back 10

Standard for all other statutes and "tie-in statutes."

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Key terminology

"Tie-in statute"

Back 11

Another statute that makes a violation of that statute actionable through the DTPA.

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Applicability of the DTPA

Who is the property party plaintiff?

Back 12

A Consumer: an ENTITY (individual, partnership, corporation, Texas, or subdivision of the state or its agency) who SEEKS or ACQUIRES by PURCHASE or LEASE of GOODS or SERVICES.

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Applicability of the DTPA

What does it mean to "seek or acquire?"

Back 13

Any purchase or good faith intent to purchase satisfies the DTPA. No requirement that you pay or consumate the transaction.

Any PURCHASER acquires, as does any INTENDED BENEFICIARY, but NOT an INCIDENTAL BENEFICIARY.

Examiners will generally tell you who was "intended" and who was "incidental" beneficiary--these are magic words.

Examples

Intended: tenant w/r/t services purchased by a landlord; an employee w/r/t goods purchased by an employer;
a purchaser or property w/r/t an inspection paid for by the seller.

Incidental: a passenger riding in a car w/r/t the car; a friend borrowing goods w/r/t the goods; an employee occasionally using goods w/r/t the goods; a fiance of a consumer w/r/t goods purchased by the consumer.

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Applicability of the DTPA

When are goods or services sought or acquired "by purchase or lease?"

Back 14

Rule: truly free services or goods are NOT subject to DTPA. But "purchase" is broadly defined; the consumer does not have to be the one who pays.

Ex. child is a consumer w/r/t services paid for by the parent; person who receives legal services is a consumer w/r/t those services; a wife is a consumer w/r/t services purchased by the husband; and a purchaser is a consumer w/r/t accounting services paid for by the seller.

The test is: did the person claiming to be a consumer acquire the goods or services by a "purchase?"

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Applicability of the DTPA

Final element: purchase or lease must be of "goods or services." How are these terms defined?

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Goods is defined to mean "tangible chattels or real property purchased or leased for use." This excludes merely lending money or intangibles.

Services is defined to mean "work, labor, or service purchased or leased for use, including services furnished in connection with the sale or repair of goods." This includes insurance (important!!!), excludes merely lending money.

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Applicability of the DTPA

Lending Money

The rule, the exception, the proper perspective...

Back 16

Rule: lending money is not subject to the DTPA. Examples: going to the bank, asking to borrow, getting a bank loan.

However, if, from the consumer's perspective, the loan is an essential part of the transaction it IS subject to the DTPA.

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Exemptions from the DTPA

Business consumers are included, except...

Burden of proof on this issue

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Those with $25,000,000 or more in assets, or one controlled by an entity with those assets.

Note: non-business consumers are included under DTPA regardless of assets.

A defendant has the burden of proof to prove the business consumer exception as an affirmative defense.

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Exemptions from the DTPA

Statutory exemption for "professional services." What is the test? What are examples?

Back 18

Professional services: here the test is "what is the essence of the service--is it providing 'advice, judgment, opinion, or professional skill?"

The exemption is service-specific, not professional specific.

Examples: lawyers, doctors, accountants, architects, engineers.

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Exemptions from the DTPA

Exceptions to the Exemption for Professional Services

Back 19

An express misrepresentation of a material fact
Failure to disclose information
An unconscionable action or course of action
Breach of express warranty

None of these can be characterized as "advice, judgment, or opinion."

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Exemptions from the DTPA

Statutory exemption for "personal injury claims"

Exceptions to the exemption

Back 20

We start with an absolute exemption for causes of action for bodily injury, death, or the infliction of mental anguish.

Exception under 17.50(b): economic damages and mental anguish arising out of a personal injury are recoverable--general damage standard

Exception under 17.50(h): all damages arising out of personal injury are recoverable for violation of a tie-in statute.

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Exemptions from the DTPA

Large Transactions - Written Contracts and Transactions over $500,000

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The DTPA does not apply to claims arising out of a written contract that relates to a "transaction, project, or set of transactions related to the same project" involving consideration by the consumer of more than $100,000.

The DTPA does not apply to a cause of auction arising of a transactions relating to the same project, involving a total consideration by the consumer of more than $500,000.

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Exemptions from the DTPA

What to keep in mind for these questions.

Back 22

The examiners will ask for the rule, then ask for exemptions.

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Who may be sued under the DTPA?

1. Basis of the complaint/no privity rule.

2. What is the test?

Back 23

Rule: no privity is required, but the transaction must form the basis of the complaint.

Test: a consumer may sue anyone who violates the act if the transaction is the basis of the complaint.

Immediate parties' conduct is always in connection with the transaction. "Immediate parties" is anyone the consumer actually deals with." But anyone who is not an immediate party is "remote," i.e. not "in connection with" the purchase.

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Who may be sued under the DTPA?

What is the "in connection with requirement?" When does this come up?

Back 24

If there is a remote party (e.g., an upstream manufacturer or a supplier who was not a party to the sale), then you should discuss "in connection with."

Ex. if the consumer purchases a good, and the salesman gives a warranty or brochure from the manufacturer to the consumer, there is now a connection. Counterexample: if a salesman relies on a manufacturer's misrepresentation and does not tell the consumer about it, this is not "in connection."

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Claims under the DTPA

Four Cumulative Claims

Back 25

Section 17/50 of the DTPA provides that a consumer may maintain an action where any of the following constitute a producing cause of economic damages for mental anguish:

(1) The use or enjoyment by any person of a false, misleading, or deceptive act or practice that is:
(A) specifically enumerated in a Subsection (b) of Subsection 17.46 of this chapter; and
(B) relied on by a consumer to the consumer's detriment;

(2) breach of an express or implied warranty

(3) any unconscionable action or course of action by any person; or

(4) the use or employment by any person of an act or practice in violation of Chapter 541, Insurance Code

These are 4 separate, but cumulative claims.

Reliance is required for any of these "laundry list" violations.

Even if you have multiple claims, there is only a single recovery for damages.

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Claims under the DTPA

The Laundry List (Misrepresentation and Reliance)

Back 26

The DTPA includes a list of 27 acts or practices that are deemed to be false, deceptive, or misleading under the Act. This list is generally referred to as the "laundry list."

This is the most common DTPA claim and a single provision may violate several provisions of the laundry list.

Ex. misrepresentation of the geographical origin of the product and any misrepresentation (the general subsumes the specific).

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Claims under the DTPA

The Laundry List - Reliance Required

Back 27

A consumer must rely on the misrepresentation to THE (i.e. the person suing) consumer's detriment.

Note the difference. "A" consumer relies to "THE" consumer's detriment. These can be different people.

Ex. H in reliance on a salesperson's misrepresentation, purchases a widget for W. W uses the widget and it catches fire damaging W's other property. W is a consumer (she acquired the widget by H's purchase). H is a consumer (he purchased the widget). W may recover as a consumer because H relied on the misrepresentation to W's detriment.

Front 28

Claims under the DTPA

The Laundry List - Prohibited Practices

Three Most Common Violations

Back 28

The laundry list makes 27 different acts and practices prima facie false, deceptive or misleading. The three most common are:

1. General misrepresentation

2. Misrepresentation about the law

3. Failure to disclose.

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Claims under the DTPA

The Laundry List - No Privity/Knowledge/Intent

Back 29

Violations of the laundry list are actionable without regard to privity and may occur prior to, simultaneously with, or after a contract has been formed. It is also significant to note that knowledge is not an element of a laundry list violation, unless required by the particular subdivision. This is a substantial change from common law fraud.

There is no requirement of a culpable mental state, unless a subsection specifically requires it (and most do not).

Front 30

Claims under the DTPA

General Misrepresentation (Most Common Violation)

Statute of Frauds and Parol Evidence Rule Inapplicable

Back 30

To constitute a violation of subsection (5) or (7), it is only necessary that the actor makes an inaccurate or false representation of fact regarding goods or services.

Statements may be oral or written. Statements that constitute mere opinion, or puffing are not actionable under the DTPA.

Examples:
1. Misrepresentation regarding coverage of title insurance policy.
2. Misrepresentation that property "properly drained."
3. Implied misrepresentation that services had been performed.
4. Oral misrepresentation that house complied with housing code.
5. Doctor's misrepresentation regarding benefits of drug.
6. Builder's misrepresentation regarding quality of house.
7. Car dealer's misrepresentation regarding rebate.

Bottom line: any misrepresentation is actionable unless it is mere puffing or opinion or a vague generalization.

Front 31

Claims under the DTPA

Misrepresentation regarding legal rights

Back 31

Often appears in the context of debt collection.

Examples:

1. Misrepresentation that layaway agreement gave seller the right to retain all monies deposited by buyer.

2. Landlord's misrepresentation of right to enter and take equipment.

3. Misrepresentation regarding right to repossess.

4. Implicit misrepresentation regarding legal right to tow car from condominium complex.

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Claims under the DTPA

Failure to Disclose

Back 32

Infrequently tested, but may be due.

The consumer must establish four elements:

1. Defendant knew information regarding the goods or services.

2. The information was not disclosed.

3. There was an **intent** to induce the consumer to enter into the transaction; and

4. The consumer would not have entered into the transaction on the same terms had the information been disclosed (material).

Note there are four requirements, including intent, but no requirement for a special relationship (e.g., fiduciary); this applies to all types of relationships.

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Claims under the DTPA

2. Unconscionability

Back 33

For purposes of the DTPA, unconscionability is defined as "an act or practice, which to a consumer's detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a *grossly unfair degree.*"

This claim can be separate or cumulative.

Do not confuse this standard of unconscionability with that contained in the UCC.

Unconscionability is determined at the time the transaction occurs.

It is an objective standard (like misrepresentation), so it does not require a showing of a culpable mental state.

Grossly unfair means that the seller treats the consumer in a way that is "glaringly noticeable, flagrant, complete, and unmitigated."

Front 34

Claims under the DTPA

3. Breach of Warranty

Back 34

The DTPA is both an independent basis for a cause of action and a vehicle through which to bring an otherwise existing claim. **Any breach of warranty is actionable by a consumer under the DTPA.**

All warranty breaches in Texas become claims under the DTPA.

But the DTPA does not create any warranties. A warranty must exist and be established outside the DTPA; it may be created by statute or common law. Look to all other state law to see if there is a warranty and if there has been a breach (this includes disclaimers).

A breach is merely actionable by the consumer through the DTPA.

Front 35

Claims under the DTPA

Breach of Warranties

Disclaimers and Limitations

Back 35

Disclaimers and limitations otherwise valid are still valid even if the claim is brought through the DTPA. So the key to these questions is to completely analyze the warranty claim as if there is no DTPA.

If you encounter a warranty and a breach, then look to the DTPA to calculate damages.

Front 36

Claims under the DTPA

Breach of Express and Implied Warranties under Chapter 2 of the Business and Commercial Code (e.g., UCC 2)

Back 36

1. Express and implied warranties under Chapter 2 of the Business and Commerce Code (sales)

This could be an area where warranties are tested. Review all the UCC warranty law. Any UCC breach of warranty can be the basis of a DTPA claim... with one exception:

A consumer may not assert implied warranty under the DTPA against a remote manufacturer.

This is because an implied warranty against a remote manufacturer is not "in connection with" the consumer's transaction.

Front 37

Claims under the DTPA

Other breaches of warranties

Implied Warranty of Suitability in Commercial Leaseholds

Implied Warranty of Good and Workmanlike Performance in Service Contracts

Implied Warranty of Good and Workmanlike Performance and Habitability in Sale of New Home

Back 37

In any commercial lease, there is an implied warranty that property is fit for its intended purpose. This warranty may be waived.

In a contract for repair or modification of tangible chattel or real estate, there is an implied warranty that work will be done in a good and workmanlike manner. This may NOT be waived.

Two different warranties for good and workmanlike performance and habitability in the sale of a new home: the workmanlike warranty may be waived; the habitability warrant generally may not.

Front 38

Claims under the DTPA

4. Insurance Code (Chapter 541)

Back 38

The fourth claim that may be brought under the DTPA is the use or employment of an act or practice in violation of Chapter 541 of the Texas Insurance Doe. Note that this claim is similar to a claim for breach of warranty in that it must be established outside of the DTPA.

Note: this is NOT a tie-in statute, any Ch. 541 violation is actionable by a consumer as a violation of the DTPA.

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Defenses to the DTPA

Negation of producing cause

Mediation and arbitration

Back 39

Common law defenses do not apply

Negation of producing cause: negate causation and preclude damages.

Mediation/arbitration: DTPA allows either party to compel mediation and it is subject to arbitration.

Front 40

Defenses to the DTPA

Pre-Suit Notice: When is it required?

Class Action Requirements

Settlement Requirements

Remedy for Failure to Give Notice

Back 40

Purpose: to give the defendant a chance to propose a settlement.

When it is required: unless filed as a counterclaim, the consumer must give written notice 60 days before filing; the notice must describe the nature of the claim and the amount of damages.

The consumer may give notice to the class, and the defendant may propose a settlement to a class.

The remedy for failure to give notice is abatement to allow notice.

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Contents of a DTPA Settlement

Back 41

A settlement offer must include an offer to pay the following amounts of money, separately stated:

(1) an amount of money or other consideration reduced to its cash value (settlement in kind), as settlement of the consumer's damages; and

(2) an amount of money to compensate the consumer for the consumer's reasonable attorney's fees incurred as of the date of the offer.

Defendant may offer settlement in kind, but must reduce to a cash value.

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Effect of Settlement, Rejection of Settlement on Damages

Back 42

If the consumer rejects the defendant's tender of settlement, it may be filed with the court together with an affidavit certifying its rejection.

Rejection of a reasonable settlement offer limits a consumer's recovery of damages. If the court finds that the Defendant's settlement offer is the same, substantially same as, or more than, the damages found by the trier of fact, the consumer ma not recovery as damages an amount in excess the lesser of:

(1) the amount of damages tendered in the settlement offer or
(2) the amount of damages found by the trier of fact.

Bottom line: rejection of a settlement offer limits damages, including attorneys' fees, and precludes punitives.

Front 43

Statute of Limitations

How many years? What is the standard?

Back 43

Two year discovery rule

An action under the DTPA must be commenced 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 such a practice.

The test is "knew or should have known." Courts use the date of injury to determine when the consumer should have discovered the act or practice.

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REMEDIES

Producing Cause

Back 44

"An efficient, exciting, or contributing cause, which in a natural sequence, produced the injuries or damages complained of."

The Texas Supreme Court has modified this standard somewhat: "A producing cause is a 'substantial factor' which brings about the injury and without which the injury would not have occurred.

This is the lowest causation standard in Texas. It is not proximate cause.

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What is one way a defendant can negate causation?

Back 45

Through a broad "as is" clause in a contract: e.g., the purchase was as is, "with any and all latent and patent defects." This is not a waiver of the DTPA.

Front 46

Damages in General

What are the three kinds of damages you can get under DTPA? What is the mens culpa requirement and how many damages can be recouped?

Back 46

The DTPA provides that each consumer who prevails may obtain ECONOMIC DAMAGES and, in an appropriate case, damages for MENTAL ANGUISH and ADDITIONAL DAMAGES of not more than THREE TIMES the damages awarded.

General standard: economic damages

If knowingly and mental anguish: three times economic damages.

If intentional, economic, mental anguish: up to three times both economic and mental anguish.

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What constitutes economic damages?

What does "economic damages" not include?

Back 47

Economic damages are "compensatory damages for pecuniary loss, including costs of repair and replacement."

The term does not include exemplary damages or damages for physical pain and mental anguish, loss of consortium, disfigurement, physical impairment, or loss of companionship and society.

In other words, all forms of pecuniary loss, but not soft damages.

Ex. medical expenses, property damages, cost of repair, lost income are included economic damages. Pain and suffering or disfigurement are not economic damages.

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What is required to prove mental anguish damages?

Back 48

"If the trier of fact finds that the conduct of the defendant was committed KNOWINGLY, the consumer may also recover damages for mental anguish."

"Knowingly" is a legal prerequisite for recovery of mental anguish damages.

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What constitutes "knowingly?"

Back 49

"Actual awareness" but this may be "inferred where objective manifestations indicate that a person acted with actual awareness."

In other words, actually known or should have known (subjective or objective).

Front 50

What is the standard of proof for mental anguish damages?

Back 50

"Substantial disruption in... daily routine" or "a high degree of mental pain and distress" that is "more than mere worry, anxiety, embarassment or anger."

KEY: this is an extremely high standard of proof, even if the legal standard is satisfied. In every answer address whether the legal AND proof standards are met.

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When are additional damages recoverable?

Back 51

If the trier of fact finds that the defendant's conduct was committed knowingly, the trier of fact may award NOT MORE THAN THREE TIMES THE AMOUNT OF ECONOMIC DAMAGES...

If the trier of fact finds that the conduct was committed INTENTIONALLY... NOT MORE THAN THREE TIMES THE AMOUNT OF DAMAGES FOR MENTAL ANGUISH DAMAGES AND ECONOMIC DAMAGES.

Front 52

Damages Rule Summarized

If knowingly....

If intentional....

What is the difference between knowingly and intentional?

Back 52

If knowingly... 3 X economic damages

If intentional... 3 X economic damages and mental anguish damages

Intentional means with knowledge and intent.

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Computing Additional Damages (Treble Damages)

Memorize these three sentences...

Back 53

1. If consumer prevails, jury may award economic damages.

2. If jury finds defendant acted "knowingly," jury may award additional damages, up to twice the economic damages, and may also award damages for "mental anguish."

3. If jury finds defendant acted "intentionally," jury may award economic damages, damages for mental anguish and additional damages up to twice the amount of economic damages and damages for mental anguish."

The MOST consumer can EVER RECOVER is THREE TIMES ECONOMIC DAMAGES.

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If asked what civil remedies are available...

Back 54

"In an appropriate case, consumer may recover equitable and injunctive relief."

Front 55

Attorneys' Fees

When are attorneys' fees awarded?

How does the act deter frivolous lawsuits through awards of attorneys fees?

How are attorneys' fees awarded?

Back 55

DTPA mandates the award of attorneys' fees to a prevailing consumer. Always mention in any question regarding damages or civil remedies: "Each consumer who prevails shall be awarded court costs and reasonable and necessary attorneys' fees."

The award is mandatory. The amount is discretionary.

Additionally, to deter frivolous lawsuits, the act mandates the award of attorneys' fees to a defendant when the suit was "groundless OR brought in bad faith, OR brought for the purpose of harassment."

Fees are awarded on an hourly basis in a dollar amount.

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What is the general DTPA standard for defendants' attorneys' fees?

Back 56

"On a finding by the court that an action under this section was GROUNDLESS or brought in BAD FAITH or brought for purposes of HARASSMENT, the court SHALL award to the defendant REASONABLE AND NECESSARY ATTORNEYS' FEES AND COURT COSTS."

Front 57

Key Terms for Defendant Awards of Attorneys' Fees

Groundless

Bad Faith

Harassment

Amount of Fees

Back 57

Groundless: no basis in law or fact

Bad faith: malice, ill will or spite

Harassment: for sole purpose of harassment

Amount: hourly basis in a dollar amount.

Front 58

Economic vs. Actual Damages / DTPA vs. Tie-In Statutes

Back 58

DTPA allows a consumer to recover all "economic damages.

Actual damages may still be recovered in cases brought through the "tie-in statutes."

Front 59

Actual Damages under a Tie-in Statute

What can be recovered?

What constitutes actual damages?

Back 59

If a claim under the DTPA is brought through tie-in statute, recovery is actual damages, and up to 3 X damages if committed knowingly.

The term actual damages has been defined to include any damages recoverable at common law, including economic, non-economic, contract, and tort damages.

Front 60

Tie-In Statutes: Federal Debt Collection Practices Act (FDCPA)

Definition of "Debt Collector"

What does the term debt include?

To who does the FDCPA apply?

What does "consumer" mean for purposes of the FDCPA?

Back 60

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 directly, debts owed or due or asserted to we owed or due another.

The term debt includes only consumer debts.

The FDCPA applies only to third party debt collectors collecting consumer debts.

The term debt collector includes any entity that in the process of collecting its own debt, uses a name other than its own, which would indicate that a third person is collecting the debt.

The FDCPA also applies to attorneys, in some cases, who regularly collect consumer debts.

"Consumer" is one who buys for personal, family, or household purposes.

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Prohibited Communication With Debtor

1. Time and Place Limits

2. Representation by an Attorney

3. Place of Employment

4. Communication with Third Parties

Back 61

1. Cannot call before 8 AM or after 9 PM

2. Debt collector may not communicate with the consumer if the debt collector knows an attorney represents the consumer.

3. Cannot communicate with the consumer at the consumer's place of business if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.

4. As a general rule, a debt collector cannot communicate with parties other than the consumer. (Both state and federal law refer to the debtor as a "consumer.") One exception: to acquire information about the consumer's location.

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Validation and Dispute of Debts

Back 62

In order to insure that consumers are not misled or deceived regarding the amount or existence of a debt, the FDCPA requires that consumers be provided notice about the amount and existence of the debt.

In the initial communication or within 5 days, the debt collector must tell the consumer he has 30 days to dispute the debt.

If the debt is disputed, he must stop all collection efforts until the debt is verified.

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Prohibited Conduct under the FDCPA

What categories of conduct are prohibited?

Back 63

The FDCPA prohibits debt collectors from engaging in harassment or abuse, making false or misleading representations, or engaging in unfair practices.

These are three general categories of conduct, which are non-exhaustive.

Front 64

Liability under the FDCPA

How may the FDCPA be enforced?

To whom is a debt collector liable?

What damages are available?

What is the relationship of the FDCPA to state law?

Back 64

The FDCPA may be enforced through a private cause of action or administratively.

Private action:

There is a short (1 year) statute of limitations for private enforcement.

A debt collector who fails to comply with the FDCPA is liable to any person in an amount equal to any actual damage sustained by such person.

The court may also award additional (statutory) damages not exceeding $1,000.

Class action:

The court may award actual damages for all class members, without regard to a minimum individual recovery, not to exceed $500,000 or 1% of the net worth of the defendant debt collector.

Plaintiffs' attorneys' fees are the same as the DTPA--court costs and attorneys' fees.

Defendants' attorneys' fees are slightly different from the DTPA--one must show bad faith AND harassment (either/or standard under DTPA).

A violation of the FDCPA may also violate the TDCA.

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STATE DEBT COLLECTION-- Texas Debt Collection Act in 1973

Back 65

The TDCA replaced the common law tort of "wrongful debt collection." It is a tie-in statute, and this is how they test whether you know the FDCPA.

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Texas Debt Collection Act

Definition of "Debt Collector"

Back 66

The TDCA uses the word "consumer" instead of "debtor" to describe the type of obligations covered by the act. Consumer is defined as "an individual who has consumer debt."

"Consumer debt" means an obligation, or alleged obligation, primarily for personal, family, or household purposes and arising from a transaction or alleged transaction.

Anyone, including a lawyer, collecting a consumer debt, is a debt collector under Texas law.

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Debt Collectors - Prohibited Conduct

Exclusive List of Categories (narrower and more limited than FDCPA)

Back 67

Threats or Coercion (threats of arrest, to take illegal action, to garnish wages, to take exempt property).

Harassment and abuse (use of profanity, annoying phone calls).

Unfair or unconscionable conduct (attempting to collect amounts not authorized).

Fraudulent, deceptive, or misleading representations (misleading or deceptive names, deceiving consumer to get information, misrepresenting consequences, misrepresenting that debt collector is an attorney).

Front 68

Enforcement of the Texas Debt Collection Act

What are the criminal penalties?

What are the civil remedies?

What attorneys' fees are available?

What is the minimum recovery for a person?

Are remedies available under other laws?

Back 68

1. Criminal Penalty: charged with a misdemeanor and fined not less than $100 or more than $500 per violation.

2. Civil Remedies
a. Actual damages
b. A person may sue for injunctive relief to prevent or restrain a violation of the TDCA; or actual damages.

Attorneys' fees reasonably related to the amount of work performed and costs.

Defendants' attorneys' fees reasonably related to the amount of work performed and cost if the court finds the action was brought in bad faith OR for purposes of harassment.

A person who successfully maintains a TDCA action--for the failure to maintain a bond or failure to properly review the accuracy of information in a file or the use of threats or coercion (very limited cases)--is entitled to not less than $100 per violation. Generally, no punitives are awarded.

A violation of the TDCA (a tie-in statute) is a deceptive trade practice under the TDTPA and is actionable under that law.

Front 69

TIE-IN STATUTES

How do you recognize a tie-in statute?

What is the major benefit of bringing in an action under a tie-in statute?

Back 69

"A violation of this Act [*not DTPA*] is a false, misleading, or deceptive act or practice within the meaning of section 17.46, Business & Commercial Code. [DTPA]. Any public or private rights or remedy prescribed by Chapter 17 of the Business & Commercial Code may be used to enforce this Act."

Write: Plaintiff's claim, therefore, is actionable under Section 17.50(h) of the DTPA. The [ ] Act is a "tie-in" statute.

The major benefit of using a tie-in statute to bring a claim under the DTPA is that damages are measured by the "actual damages" standard rather than "economic loss."

If a DTPA claim is brought through a tie-in, recovery is actual damages, and up to THREE TIMES if KNOWINGLY.

Front 70

What are the most common tie-in statutes that prohibit deceptive practices?

Back 70

A. Business Opportunity Act (X promises to sell buyer goods to start a business)

B. Contest and Giveaway Act (X offers contest to get consumer to attend a sales presentation).

C. **DEBT COLLECTION ACT**

D. Health Spa Act (regular health club, 3 days to rescind)

E. Home Solicitation Act (door-to-door sales, 3 days to rescind)

F. Credit Service Organizations (regular credit repair organizations)

G. Removal of Unauthorized Vehicles from Parking Facility (a towing act, requires very specific signs)

H. Rental-Purchase Agreements (regular rent-to-own agreements)

I. Representation as Attorney (prohibits a notary public from holding out as an attorney)

Front 71

What are the most common tie-in statutes that prohibit deceptive practices? (continued)

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J. **MANUFACTURED HOUSING STANDARDS ACT** (Most likely tested: just like the DTPA, it applies to mobile homes. If you see a problem involving mobile homes, mention this act so that you can bring in the DTPA claim)

K. Motor Vehicle Commission Code (lenders law, applies to new cars)

L. Timeshare Act (timeshare interest in land, 6 days to rescind)

M. Unfair Claims Settlement Practices Act

N. Regulation of Telephone Solicitation (regular, unsolicited phone calls and faxes)

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INSURANCE LAW

Misrepresentation and Discrimination Chapter 541

What is the objective?

What is one significant difference with the DTPA?

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To protect against unfair and deceptive acts or practices in the insurance business.

DTPA for insurance is almost identical to the general DTPA (with 2 differences).

The first important difference is SCOPE: it applies to any PERSON--not limited to consumers. So in your answer to any question dealing with insurance write: "any person may sue for violation of Ch. 541."

The second important difference is DAMAGES: Chapter 541 awards actual damages; the DTPA awards damages for economic loss.

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Prohibited Practices under Chapter 541

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Unfair Methods of Competition and Deception: protects insurance companies AND persons adversely affected from anti-competitive practices

Misrepresentation and False Advertising of Policy Contracts: by insurance agents or the company

Defamation: prohibits insurance companies from defaming a competitor

Unfair Discrimination: against people of the same insurance risk and class

Deceptive Name, Word, Symbol, Device, or Slogan: prohibits trading off another's name, symbol, logo, etc.

Unfair Settlement Practices: "statutory bad faith" failing to attempt in good faith to effectuate a fair, prompt, and equitable settlement with the insured once liability is reasonably clear. Common law unfair settlement is the same.

Misrepresentation of Insurance Policy: terms or existence of a policy (probably the broadest prohibition).

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What relief is available under Chapter 541?

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Chapter 541 establishes a private cause of action for a violation of the article's provisions. A claim may be filed by *any person* who has sustained *actual damages* caused by another's engaging in an act or practice declared in Chapter 541 to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance.

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How many possible causes of action if the claim deals with insurance?

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One act may result in four causes of action.

A person who is a "consumer" may file a claim under the DTPA based on any violation of Chapter 541.

And the Insurance Code authorizes a suit to be brought for any violation of the DTPA laundry list.

Four causes of action:

1. As a person, suing under the insurance code.
2. As a consumer, suing under the DTPA.
3. As a person, suing under the Insurance Code for laundry list DTPA violations.
4. As a consumer, suing under the DTPA for Insurance Code violations.

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Remedies for Chapter 541 Violations

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1. Actual damages plus court costs and reasonable attorneys' fees. This means any damages recoverable at common law, determined by the total loss of the consumer.

2. Additional damages if the defendant knowingly committed the acts complained of: no more than three times.

3. Plaintiff's attorneys' fees: an amount that is "reasonable and necessary."

4. Defendant's attorneys' fees: on a finding of the court that the action was "groundless AND brought in bad faith or brought for the purpose of harassment," reasonable and necessary attorneys' fees and court costs.

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Statute of Limitations for Chapter 541 Violation

Notice

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Two Years Discovery Rule (same as DTPA)

Consumer must give defendant written notice at least 60 days before filing the suit (same as DTPA)

Remedy for failure to give notice (same as DTPA)

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Settlements for Chapter 541 Violations

When Offered, Contents, Effect, Attorneys Fees, Class Action

Mediation

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Same as DTPA

Mediation: either side may file a motion to compel mediation, within 90 days after service of a pleading seeking relief under Chapter 541. Both sides must share the costs of the mediation, unless the amount of economic damages sought is less than $15,000, in which case the party requesting mediation must pay the cost. Mediation generally must be held within 30 days of the request.

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Prompt Payment of Claims [Chapter 542]

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Notice of Claim: insurer must respond to a claim not later than the 15th day after the receipt of notice of a claim or the 30th business day if the insurer is an eligible surplus lines insurer.

Acceptance or Rejection of Claim: must accept or reject, generally within 15 days.

Unable to Accept or Reject: can get an extension up to 45 days.

Failure to Accept or Reject: subject to a penalty.

Payment of Claims: must pay within 5 days or be subject to a penalty.

Damages: statute provides for liquidated damages to the claimant, where delay results in a penalty of 18% per annum of the amount of claims and reasonable attorneys fees.

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Common Law Duties of Good Faith for Insurers

What is the standard?

What if there is a "bona fide dispute?"

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An insurer breaches the duty of good faith and fair dealing it owes to an insured in handling a claim when it fails to "attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear." This is a tort, with tort-like damages.

If there is a bona fide dispute as to law or fact about coverage, the insurer's denial of a claim will not be in bad faith.

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What is the "Stowers Doctrine?"

What is the extent of Stowers liability?

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The Stowers Doctrine holds that if the claimant offers to settle for policy limits when the liability is reasonably clear, the insurer has a duty to settle. If the insurer refuses to settle, it will be liable for any additional damages imposed upon the insured. Refusal to settle is "wrongful" and violates the insurer's duty of good faith.

A Stowers plaintiff may recover as damages all amounts rendered against him in excess of his policy limits, including postjudgment interest on the judgment amount. An insurer's wrongful refusal to defend the insured subjects the insurer to potential liability for extra-contractual and statutory damages including both punitive and treble damages.