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

 
Consumer Transactions Outline
Steiner
Spring 2014
 
 
 
I.      Texas Deceptive Trade Practices Act
a.       Intro
a.i.  First created in 1973 to eliminate prior obstructions to consumers bringing suits (low dollar recovery, especially in light of litigation costs/high burden of proof for fraud).  Atty fees being awarded can make these cases economically feasible to be tried.
a.ii.                       In 1995 Tort Reform set in, and DTPA claims have decreased, since there is now a cap on damages.
b.       Exemptions – 17.49
a.i.  Certain things are exempted from coverage of the DTPA.
a.ii.                       The impetus for the exemptions came when it appeared that there might be a DTPA case for things like legal malpractice.  Attorneys didn’t want to be liable for treble damages and attorney’s fees.
a.iii.                     (a) The media is exempted from DTPA cases where they do things like running an ad in the paper (unless they knew it was false).
a.iv.                     (c) Legal malpractice cases are exempted from DTPA cases, except for 5 listed occurrences.
a.v.                       (e) Products liability cases
c.       OVERVIEW OF THE DTPA
a.i.                       §17.50 (creates a private right of action for injured consumer)  A consumer may maintain an action where any of the following constitute a producing cause of economic damages or damages for mental anguish (DTPA Causes of Action):
a.i.1.                      A false, misleading, or deceptive act or practice that is:
a.i.1.a.                 specifically enumerated in §17.46 (“the Laundry List”) AND
a.i.1.b.                 relied on by a consumer to the consumers detriment;
a.i.2.                      breach of an express or implied warranty;
a.i.3.                      An unconscionable action or course of action by any person;
a.i.4.                   a violation of the Insurance Code Ch. 541.
a.ii.                    Elements of DTPA Cause of Action
a.i.1.                      Plaintiff is a consumer (consumer standing)
a.i.2.                      Defendant committed a proscribed act in §17.50 (1 of the 4 cons. COA’s)
a.i.3.                      Defendant’s acts were producing cause of the consumer’s damages.
a.i.1.a.                 “but, for” causation, no forseeability requirement
a.iii.                  §17.44: Construction & Application
a.i.1.                      The DTPA is supposed to be liberally construed:
a.i.2.                      (a) This subchapter shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection.
d.       CONSUMER STANDING REQUIREMENT — Element 1
a.i.  Having status as a consumer gives a P standing to file suit under the DTPA. Without consumer standing, there can be no cause of action under the DTPA.
a.i.1.                   Whether a D commits a violation actionable under the DTPA is a different question than whether they have consumer standing.
a.ii.                       §17.45(4): DTPA definition of “Consumer”:
a.i.2.                      An individual, partnership, corporation, this state, or an agency
a.i.1.b.                 Businesses too can use the DTPA, not just individuals.
a.i.3.                      Who seeks or acquires
a.i.4.                      By purchase or lease
a.i.5.                      Any goods or services
a.i.6.                      The term does not include a business consumer w/ assets of $25MM or more or that is owned or controlled by a corp. or entity with assets of $25MM or more.
a.i.1.a.              Big business limitation to keep the DTPA for small business & individual use.
a.iii.                     Test for Consumer Status:
a.i.1.                      An individual, person, or state that:
a.i.1.b.                Seeks OR acquires
a.i.1.c.                 For purchase OR lease
a.i.1.d.                Goods OR services AND
a.i.1.e.                 The goods or services purchased or lease must be the basis of the complaint.
a.i.2.                      The Two part test:
a.i.1.a.                 P must have sought or acquired by purchase or lease some goods or services; AND
a.i.1.b.              The goods or services purchased or leased must form the basis of the complaint.
a.i.3.                      Standard:
a.i.1.a.                 If facts are undisputed, then it’s a question of law for the judge.
a.i.1.b.             If the facts to determine consumer status are disputed, then it’s a fact question for the jury.
a.i.4.                      “Seek or Acquire”
a.i.1.a.                 Do not have to purchase in order to have consumer standing, but it does makes it difficult to prove damages.
a.i.1.b.             No privity of contract required for the plaintiff to have consumer standing.
a.i.1.c.                 Important aspect: look at the Plaintiff’s “relationship to the transaction.” 
a.i.1.d.                 A third party beneficiary may qualify as a consumer if he’s a primary intended beneficiary (must be bought FOR this person; not just an “incidental benefit”).
a.i.1.a.i.           If derived for the person, then they may be a consumer; EX:
a.i.1.a.i.1.        If X buys service for Y, Y has consumer standing.
a.i.1.a.i.2.        Employee complains about dust and employer buys that employee a respirator.
a.i.1.a.i.3.        Funeral services are bought for the living relatives of the dead, so the family of the deceased are 3rd party beneficiaries.
a.i.1.a.i.4.        Baby in hospital is the primary intended beneficiary.
a.i.1.a.i.5.        Employer provided insurance — employee is primary intended beneficiary & insurance is purchased for that employee .
a.i.1.a.ii.         Incidental benefit  person is not a consumer:
a.i.1.a.i.1.        Employer buys a forklift to be used during employee’s employment and forklift is defective and employee is injured.
a.i.1.a.i.2.    Employee is injured at work by robber because security system was defective.
a.i.5.                      “For purchase or lease”
a.i.1.a.                 A gratuitous acts/good is not a purchased good/service under the DTPA.
a.i.1.a.i.           Cannot sue a court appointed lawyer under the DTPA.
a.i.1.b.                 “Free” servicing under warranty could still be by purchase because it was bargained for (paid for) when the customer bought the car.
a.i.1.c.                 “Free estimates” are arguable 
a.i.1.a.ii.         If damaged before the shop agrees to repair, then no standing.  It’s an unconsummated transaction.
a.i.1.a.iii.  If damaged after they agreed to repair, then consumer standing because it’s a consummated transaction.
a.i.6.                      “Goods or Services” under §17.45:
a.i.1.a.                 (1): Goods: means tangible chattels or real property purchased or leased for use.
a.i.1.a.i.           No intangibles (goodwill, securities, loss of consortium), no money.
a.i.1.b.             (2): Services: means work, labor, or services purchased or leased for use, including services furnished in connection with the sale or repair of goods.
a.i.1.c.                 Extension of credit, without something more, is not a good/service because money is not a good/service:
a.i.1.a.ii.   However, the extension of credit in order to attain a good/service may be a good/service.
a.i.1.a.iii.       Consumer status and loan transactions: In a straight loan transaction, you’re only borrowing money.  Money is not a good and then act of funding the loan is not a service.
a.i.1.a.i.1.        If the loan is part of other services, or part of a purchase of good, the court will find consumer status.
a.i.1.a

ee drink so he would stay and buy more.)
a.iv.                     The TXSC has held that DTPA actions cannot be assigned.
a.i.1.                     Texas courts have tended to view DTPA claims as uniquely personal to the original consumer.
a.i.2.                      Recent cases indicate that DTPA cases do not survive the death of the consumer.
a.i.3.                      DTPA claims only belong to the original consumer and the original consumer cannot assign that claim.  The TXSC held that it DTPA actions shouldn’t be assignable.
a.v.                       DTPA causes of actions apply to private sellers as well. You don’t have to be “in the business of selling.”
e.      LAUNDARY LIST VIOLATIONS – (1 of the 4 consumer COA’s under the DTPA)
a.i.                       Elements for a Laundry List Violation: –§17.50
a.i.1.                   P has consumer standing
a.i.2.                   Defendant Violated of one of the LL Violations (27 claims listed)
a.i.3.                    Reliance by the P on the misrepresentation to P’s detriment
a.i.4.                    Defendant’s actions caused mental or economic damages
a.ii.                     “Must- know” Laundry List Violations
a.i.1.                   (5): Characteristics: representing that goods/services have characteristics that they don’t have;
a.i.1.a.             Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he does not.
a.i.2.                   (7): Quality: representing that goods/services are of a particular quality if they aren’t;
a.i.1.b.                 Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.
a.i.3.                   (9): False Advertising: advertising goods/services with intent not to sell them as advertised.
a.i.4.                   (12): Agreement: representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law.
a.i.5.                   (20): Warranty: representing that a guarantee or warranty confers or involves rights or remedies that it doesn’t have or involve– cannot expand implied warranty of merchantability.
a.i.6.                    (24): Deceptive Silence: failing to disclose information about goods/services that was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction which the consumer wouldn’t have entered had the information been disclosed.
a.i.1.a.                 If there is no intent element, then it is strict liability (no inquiry into the sellers innocent/guilty mind state).
a.i.1.a.i.        “TX Supreme Court has held that D may be liable for LL violation even if D did not know that the representation was false and it did not intend to deceive”
a.i.1.b.               If there is an intent requirement, the P has the burden to prove intent.