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Consumer Law
South Texas College of Law Houston
Steiner, Mark E.

I. Overview of DTPA:
A.     Introduction: DTPA liberally construed & applied to promote underlying purposes (i.e. protect consumers)
a.       § 17.50: consumer may maintain action where any of the following constitute a producing cause of economic damages or damages for mental anguish:
                                                  i.      use/employment by any person of a false, misleading, or deceptive act/practice that’s:
1.      Specifically enumerated (the laundry list), and
2.      relied on by a consumer to the consumer’s detriment
                                                ii.      Breach of an express or implied warranty
                                              iii.      Any unconscionable action or course of action by any person; or
                                              iv.      Use or employment by any person of an act or practice in violation of Insurance Code
b.      Elements: P=consumer; D committed proscribed acts; D’s acts = producing cause of consumer’s damages
B.     Definition of Consumer: threshold issue (lack of evid showing DTPA violation doesn’t mean P≠ consumer)
a.       Consumer: an individual, partnership, corp., this state, or subdivision/agency of TX who seeks or acquires by purchase or lease, any goods or services; doesn’t include business consumer w/ ≥ $25 million assets, or that’s owned/controlled by corp./entity w/ ≥ $25 million
C.     The “Two-Part Test”: if undisputed facts, question of law; if disputed, question of fact
a.       To qualify as consumer, 2 requirements must be established:
                                                  i.      The person must have sought or acquired goods or services by purchase or lease; and
                                                ii.      The goods or services purchased or leased must form the basis of the complaint
b.      Key Points to include in essay:
                                                  i.      Privity of K is not required
                                                ii.      You don’t have to pay for G/S to be CR (absence of cash transfer not determinative)
                                              iii.      P’s standing is established by his r/ship to the transaction
c.       Kincaid: Ks negotiated settlement w/ Cummins’ agent re: truck’s engine; held—not CRs b/c when discussing settlement, weren’t trying to P/L G/S, only purpose was to resolve complaints re: truck’s engine; even though settlement agreement did contain repair services, agreement itself ≠ G/S
d.      (1) Seek or Acquire: (if just borrowing something, you haven’t “acquired” it)
                                                  i.      3rd party beneficiary can be CR as long as transaction was specifically required by OR intended to benefit 3DP and the G/S was rendered to benefit 3DP
1.      Primary Intended beneficiary v. Incidental beneficiary
2.      Primary intended B: EEs of ins. policy purchased by ER; cemetery buried body wrong, moved it; mom dealt w/ D but M & kids CRs b/c services intended for benefit of decedent’s immediate family
3.      Incidental: any benefit derived from P/L of G/S by person merely gratuitous & incidental to other person (see July 2011 bar exam question)
a.       Hotel guest=incidental B of K b/t hotel & security co.
b.      G/S are P/L for primary purpose of benefitting business, & any use/benefit of those products extends only incidentally to EE, EE ≠ consumer
c.       Will beneficiaries injured by estate counsel’s legal malpractice
d.      Hospital EE injured by defectively repaired gas sterilizer
e.       Rivera-EE=incidental B of K b/t security co. & mgmt. co. where hospital located
                                                ii.      DTPA COA doesn’t survive death of original CR (not provided by statute, recovery=punitive, personal) (Parents of dead kid can’t sue for defective pool; CR’s estate/individual beneficiaries of estate≠ CRs themselves can’t pursue claim)
e.        (2) By Purchase or Lease:
                                                  i.      A gratuitous act ≠ a purchased G/S  (Rayford-free legal services, P ≠ consumer)
                                                ii.      Jones: P sought repair of car (service) under warranty that obligated D to repair car w/o compensation; P satisfied 1st prong even though he didn’t pay; warranty repairs were necessarily a part of the car purchase
f.        (3) Any Goods or Services:
                                                  i.      (a) Goods:
1.      § 17.45(1): tangible chattels or real property P/L for use
a.       Must purchase “for use” but don’t have to use up (resale, breeding stock)  
b.      Tangible goods
                                                                                                                          i.      In general, money is not a good
                                                                                                                        ii.      Credit is not a good or service (lending of $ ≠ good or service)
2.      DTPA and Money:
a.       Internat’l Harvester: retail installment K distinguished from Riverside b/c violation doesn’t deal solely w/ extension of credit, financing was means of making purchase; DTPA COA associated w/ sale of truck (good); P=CR
                                                                                                                          i.      When borrower’s objective is to obtain G/S and the loan merely provides the means for obtaining the G/S, borrower qualifies as CR
b.      Riverside: “pure loan transaction”-refinance car loan, P sought only to borrow $, P≠ consumer b/c didn’t seek/acquire G/S, $ ≠ G/S; sought credit & nothing more
                                                                                                                          i.      Borrower whose sole obj.=loan doesn’t become CR merely b/c lender provides services incidental to loan that aren’t independent objectives of transaction
                                                                                                                        ii.      Limited to facts b/c P sought only extension of credit & nothing more
c.       Flenniken: builder assigns homebuyer’s note to bank; bank forecloses; Fs make no complaint as to Bank's lending activities, unlike Lewis, Fs didn’t seek to borrow $; sought to acquire a house; house thus forms basis of their complaint
                                                                                                                          i.      Homebuyer entitled to CR status as to all parties who sought to enjoy the benefits of the transaction, including lender
                                                ii.      (b) Services:
1.      § 17.45(2): work, labor, or service P/L for use, including services furnished in connection w/ the sale or repair of goods
2.      Purchase of services: means actual transmission of services from 1 person to another by voluntary act or agreement, founded on valuable consideration
3.      When borrower seeks services from lender as independent objective & not merely ancillary to loan, borrower=CR w/ respect to provision of services
4.      Activity related to loan transaction=service only if activity at issue, from P’s point of view, is an objective of transaction, not merely incidental to it
5.      Examples:
a.       Car repairs; Title insurance; Legal representation
b.      Fin. counseling services + loan & services formed basis of DTPA claim
c.       P specifically requested & was provided credit ins. in connection w/ loan; P=CR in suit against bank for misreps. about credit ins.
d.      P asked lender to register title papers to car purchased w/ loan proceeds; held-CR, can sue for lender’s failure to process title papers
6.      Allen: P’s obj.=get tax suit taken care of & P told lender that; D agreed to “take care of it,” loaned $ & provided escrow services to accomplish P’s obj.; P=CR b/c primary objective was to obtain services that are basis of claim
a.       Key: whether borrower’s objective is solely to obtain loan or to obtain G/S
                                              iii.      (c) Goods or Services Not Incidental to the Transaction:
1.      G/S must be an objective of transaction, not merely incidental to it
2.      Bennett: P’s obj.=buy home, P executed note & deed of trust incidental to purchase & original lender required PMI as condition to financing; although loan itself ≠ purchase of G/S, it was incidental to purchase of home (good); by virtue of becoming holders of loan, Ds became connected w/ P’s transaction & subject to DTPA; b/c loan, w/ PMI requirement, was connected to purchase of good, P=consumer
3.      La Sara Grain: lender may be subject to DTPA claim if borrower’s objective is P/L of G/S thereby qualifying the borrower as a CR
4.      White: W purchased real estate from S, assumed note & deed of trust that required PMI pmts. for benefit of mortgagee; W complained that loan servicer (M) violated DTPA; held-W ≠ CR, didn’t seek M’s services of collecting PMI pmts, W’s obj. ≠ to buy PMI  
5.      Plunkett: fin. advice on when to borrow, whether to borrow, & how to structure fin. arrangements of business operations is not typically incidental to loan itself; this fin. advice constitutes obj. independent of loan transaction; however, in this case, the end & aim of Byron’s interaction w/ Burleson was to assist Plunkett in obtaining construction loan, only thing sought by P/L was loan of $. Burleson’s ancillary services served no purpose apart from facilitating construction loan
                                              iv.      (d) Goods or Services and the Two-Part Test:
1.      Fix: G/S must form basis of complaint; although title ins. = a service under DTPA, basis of their complaint is that D refinanced too soon after initial home equity loan w/ docs. that permitted personal recourse & nonjud. foreclosure, P’s DTPA claim doesn’t implicate title ins. services provided by D; therefore, no consumer status
II. Violations of the DTPA: Laundry List and Unconscionability:
A.     The Laundry List: (proving DTPA laundry list isn’t the same as proving common-law fraud)
a.       Must be: (1) specifically enumerated (17.46) and (2) relied on by consumer to detriment (& producing cause)
b.      (a) False/misleading/deceptive acts/practices in conduct of any trade/commerce are unlawful
c.       (b) except in (d), false/misleading/deceptive acts/practices includes, but isn’t limited to, following:
                                                  i.      passing off G/S as those of another
                                                ii.      causing confusion/misunderstanding as to source, sponsorship, approval, or certification of G/S
                                              iii.      causing confusion/misunderstanding as to affiliation/connection/ass’n w/ or cert. by another
                                              iv.      using deceptive representations/designations of geo. origin in connection w/ G/S
                                                v.      representing that G/S have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they don’t have or that person has sponsorship, approval, status, affiliation, or connection which he doesn’t
                                              vi.      representing that goods=original/new if they’re deteriorated/reconditioned/reclaimed/used/2ndhand
                                            vii.      representing that G/S are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another
                                          viii.      disparaging G/S or business of another by false/misleading representation of facts
                                              ix.      advertising G/S w/ intent not to sell them as advertised  
                                                x.      advertising G/S w/ intent not to supply a reasonable expectable public demand, unless the advertisements disclosed a limitation of quantity
                                              xi.      making false/misleading statements of fact re: reasons for/existence of/amt. of price reductions
                                            xii.  representing that an agreement confers or involves rights, remedies, or obligations which it doesn’t have or involve, or which are prohibited by law
                                          xiii.  knowingly making false/misleading statements of fact re: need for parts/replacement/repair service
                                          xiv.  misrep. authority of salesman/rep./agent to negotiate final terms of consumer transaction
                                            xv.  basing charge for repair of any item in whole/part on guaranty/warranty instead of on value of actual repairs made/work to be performed on item w/o stating separately the charges for the work and the charge for the warranty or guaranty, if any;
                                          xvi.  disconnecting, turning back, or resetting the odometer in car
                                        xvii.   advertising of any sale by fraudulently representing that person is going out of business
                                      xviii.  advertising/selling/distributing card purporting to be prescription drug ID card, which offers discount on health care G/S from 3rd party provider, & isn’t evid of ins. coverage, unless:
1.      discount authorized under agreement b/t card seller & G/S provider or discount/card is offered to members of seller;
2.      seller doesn’t represent that card provides ins. coverage of any kind; and
3.      the discount is not false, misleading, or deceptive;
                                          xix.  using/employing a chain referral sales plan in connection w/ sale/offer to sell goods, merchandise, or anything of value, which uses sales technique/plan/arrangement/agreement

intended to, nor had they been, incorporated into marketing of the homes
                                                ii.      Arthur Andersen: P sued AA, accounting firm that prepared audit of M (co. P wanted to buy); P didn’t hire or pay AA, AA hired & paid by M; held—b/c P insisted on audit & b/c D had been hired (even though not by P) to do the audit, P had sought & acquired AA’s services
                                              iii.      Church & Dwight: H learned about C&D’s product from T (AG rep.), T gave H C&D brochure demonstrating use of product & flyer describing AG’s services; C&D flyer represented that product rinsed away easily but it didn’t; T came to site, then rep. from C&D came to site
1.      Manufacturer’s misrepresentation needs to get to the consumer (not just middle man) AND consumer must detrimentally rely on it
a.       Intent is irrelevant – i.e. mfr intended pamphlet to get to CR – doesn’t matter that they intended it to! need to show that pamphlet DID get to CR, then CR has a claim against mfr
b.      2 ways a representation can reach the consumer
                                                                                                                          i.      Info from manufacturer to middleman to customer
                                                                                                                        ii.      Something direct from manufacturer to consumer
2.      C&D wasn’t present at original transaction, just as in Arthur Andersen, but H most certainly sought & acquired C&D’s product, based, in part, on mfr’s rep.; further, just as in AA, H relied on provider’s reps. to make a business decision; C&D was connected to the transaction b/c C&D’s product was the only subject of the transaction
3.      Compared to Amstadt: C&D ≠ mfr of component part
a.       C&D mfr’d completed product; can’t be combined w/ something else to create different product to sell to consumer; consumer purchases product; component part may be baking soda but product itself is what H bargained for
b.      C&D was connected to transaction: marketing efforts were incorporated into AG’s marketing efforts & they formed basis of H’s decision to use product; when AG gave demonstration, they gave C&D brochure to H; bags of product had advertising label on them w/ C&D’s name & business address; these marketing connections go beyond those in Amstadt & provide a legal basis for holding C&D liable for any DTPA violations
B.     Unconscionable Conduct or Course of Conduct: must examine entire transaction, not just D’s intent
a.       COA if: any unconscionable action/course of action by any person=producing cause of econ/MA dam.
b.      “Unconscionable action or course of action”: means an act/practice which, to a CR’s detriment, takes advantage of lack of knowledge, ability, experience, or capacity of consumer to grossly unfair degree
                                                  i.      Grossly unfair: resulting unfairness was glaringly noticeable, flagrant, complete & unmitigated
                                                ii.      Latham: (dissenting) not grossly unfair/unmitigated conduct when attorney fails to pursue meritless suit, even if attorney tells client that suit was filed when it hadn’t; such conduct isn’t to be condoned & attorney would be subject to disciplinary proceedings, but not unconscionable
c.       Bennett: dance lessons-Ks $5 – $49K; prior to each K, P subjected to calculated flattery & better judgment diminished b/c of excessive compliments; instructors received %; jury could evaluate D’s motives by their conduct; as soon as P started program, new instructor appeared, & new, more expensive K offered; when P finally refused to sign new K, D’s attitude towards P radically changed; jury could properly infer from evid that P was lonely widow who lacked knowledge…to w/ stand premeditated attention lavished upon her by Ds, who purposefully took advantage of vulnerability to grossly unfair degree
d.      Moench: TX cts. haven’t adopted a “legal justification” defense to DTPA unconscionability claim; even though party believes it’s acting pursuant to K, conduct may still constitute unconscionable course of action; evid of unconscionability must be > mere breach of K; must look at transaction as a whole  
                                                  i.      D argued acting pursuant to K; D’s conduct=unconscionable b/c: knew P couldn’t perform work on boat b/c of disability but claimed that water damage, which required substantial work, wasn’t good enough reason to cancel K; P’s surveyor influenced by D, delayed access to boat, required surveyor to send D reports before sent to P; D aware P sold home to buy & needed $ back after decided not to buy boat; when P demanded $ back, D ignored at first then responded w/ hostility
                                                ii.      If P receives favorable findings on 2+ COA, P entitled to judgment on COA that affords greatest recovery
                                              iii.      Weiler: although proper foreclosure complying w/ law won’t support DTPA COA, evid showed bank’s conduct=unconscionable b/c improperly w/drew $ from acct. & then sent conflicting demands for pmts.; holding in face of argument that justified by mortgage & bankruptcy ct. order 
e.       Bennett v. UB: no unconscionability; PMI reimbursement was required until note paid in full; although bank expressed policy that may permit canceling payments, policy had no effect on P b/c undisputed that another bank held mortgage, & had contrary policies; practice of requiring PMI pmts. has long been used