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Consumer Transactions
South Texas College of Law Houston
Powers, Jean Fleming

 
Consumer Transactions/ Fall 2015/ Jean Powers
Chapter 1 – Introduction to DTPA
v  Overview of the DTPA
Ø  Liberally Construed 17.44 Construction and Application
§ 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.
Ø  DTPA 17.50 Creates a private right of action for the 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:
·         The use of employment by any person of a false, misleading, or deceptive act or practice that is:
¨      Relied on by a consumer to the consumer’s detriment
·         Breach of an express of implied warranty;
·         Any unconscionable action or course of action by any person; or
·         The use or employment by any person of an act or practice in violation of Chapter 541, Insurance Code
Ø  Elements of DTPA consumer action
§  The P is a consumer as defined by statute
§  The D committed one of the four defined violations and
§  The violation was the producing cause of economic or mental anguish damages
Ø  The Definition of Consumer
§  Consumer means an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks to acquires by purchase or lease, any goods or services, except that the term does not include a business consumer that has assets of $25 million or more, or that is owned or controlled by a corporation or entity with asses of $25 million or more
§  Goods means tangible chattels or real property purchased or leased for use
§  Services means work, labor, or service purchased or leased for use, including services furnished in connection with the sale or repair of goods
Ø  The Two-Part Test
§  Consumer must seek or acquire goods or services by purchase or lease
§  Goods or services acquired or sought must form basis of complaint
§  Cameron v. Terrell & Garrett, Inc.
·         Issue: Whether the Camerons are consumers within the meaning of the DTPA
·         Facts: Bought house that said it was 2400 square feet, actually 2245 square feet. Misrepresentation was made by the real estate agent and P did not buy the house from them
·         Used 2 part test
·         Exemption from the act: certain media owners and employees who publish and disseminate deceptive advertisements of goods and services for third parties
¨      Does not extend immunity from the Act where the media defendants knew of the deception in the advertisement or had a direct or substantial financial interest in the unlawfully advertised good or service
·         Consumer can bring suit if he has been adversely affected by the “use or employment by any person of an act or practice declared to be unlawful in Sec. 17.46”
¨      P is a person under the act
·         Holding: A person need not seek to acquire goods or services furnished by the D to be a consumer under the DTPA
¨      P are consumers because they purchased the goods on which their complaint is based
·         Real estate is a good under the DTPA
·         Don’t need privity under DTPA
·         He could have sued homeowner
§  Johnny Collums v. Ford Motor Company
·         Issue: Whether the TC erred in grating summary judgment on the ground that the appellants are not “consumers” under DTPA because they weren’t residents of TX
·         Facts: Truck bought with warranty. Went to get truck fixed and D denied the service and then sent them a bill even though truck was still under warranty.
·         Use two part test
·         Appellants are consumers because the mechanical problem associated with the truck and Ford’s refusal to honor the warranties form the bases of the appellants complaint
·         Plain language of the DTPA’s definition of consumer does not contain a residency requirement
¨      Appellants did not have to establish their TX residency in order to establish their status as DTPA consumers
·         Holding: They are consumers, don’t have to be a resident
§  Seek or Acquire
·         Ex: Person trying out exercise equipment is injured and she sues
¨      Equipment center says she hasn’t bought anything so she isn’t a consumer
¨      She is a consumer because she was seeking to acquire, you don’t have to actually acquire
·         Service Corporation International v. Estela Aragon
¨      Facts: D improperly buried husband/father by burying him in the wrong plot and then moving body without wife’s permission
¨      Issue: Are third party children able to bring a claim as consumer under DTPA when wife bought the goods?
¨      A third party beneficiary may qualify as a consumer as long as the transaction was specifically required by or intended to benefit the third party and the good or service was rendered to benefit the third party
¨      Courts consider whether the 3rd party was the primary intended beneficiary or it if derived only an incidental benefit
Ø  TX courts have allowed immediate family members to bring common-law actions for mishandling a corpse
Ø  Even though only one of the decedent’s children dealt with the defendant because each was allowed to recover, the D duty ran to all 4
¨      Holding: Each child was a consumer
¨      Third party beneficiaries
Ø  Benefit from promisor and 3PB
Ø  Intent from promisee to 3PB
Ø  Promise and consideration between promisor and promisee
·         Ex: Wedding gift for son. Sent to son. Bought by dad. Appliance didn’t work
¨      Son sues. Is he a consumer? Yes he is a 3PB. Intended to be for son, not for dad
·         Other 3PB Cases
¨      Kennedy case:
Ø  Employer provides health insurance to employees and pays its entire cost
§  At the benefits meeting, Kahn asks if pre-existing conditions are covered and is assured by insurer they are
§  Kahn elects to have employer provide health insurance, foregoing spouse’s insurance
§  Kahn’s subsequent claims are denied because of preexisting condition
§  He is a consumer, bought a product and promised it would cover the condition
Ø  Vinson and Elkins
§  Will beneficiaries allegedly injured by estate counsel’s malpractice
§  They are incidental beneficiaries
§  Firm was hired by executors to administer estate
§  Potential beneficiaries not 3PBs of attorney-client K
§  In TX, intended will beneficiary has no standing to sue attorney

·         Ex: Strictland propane wanted to buy Fowler Fuels
¨      As a condition of sale, Strickland wanted an audit of Fowler’s financial statements
¨      Fowler said that wasn’t necessary because it has Arthur Anderson conduct an audit three months earlier
¨      Strickland agreed that was sufficient and Fowler provided the financial statements audited by Arthur Anderson
¨      The audit favorably reported Fowler’s financial condition when in fact the company was suffering substantial losses
¨      Strickland then relied on those favorable statements in reaching its decision to purchase Fowler
¨      After discovering Fowler’s true financial condition, Strickland sued Arthur Anderson under the DTPA
¨      Does he have standing?
Ø  No transaction that he has any relationship to
Ø  It was not prepared for him, so he has not standing
·         Ex. Same facts but now he requires an audit to buy the company
¨      He has standing now
§  Any Goods or Services
·         Purchase for resale is purchase for use
·         The purchase of cattle as breeding stock is purchase for use
·         Ex. Used car dealer sued auto auctioneer for breach of warranty related to 2 stolen cars it sold to dealer
¨      Dealer was buying cars for resale
¨      Goods are tangible chattels bought it for use
¨      Resale is use, dealer is a consumer
·         Riverside National Bank v. James Lewis
¨      Issue: Whether one who seeks a loan from a bank in order to refinance a car qualifies as a consumer under the DTPA
¨      Facts: Lewis had a loan he failed to pay to Allied. He tried to refinance the loan with Riverside. Riverside told him he was approved and that they issued a cashier’s check. The loan was never actually refinanced. Lewis sues under DTPA
¨      Money is not a good
Ø  Money is a currency of exchange that enables the holder to acquire goods
¨      Seeking to acquire money is also not a seeking of work or labor
Ø  Services did not include the extension of credit or the borrowing of money
¨      Lewis did not attempt to acquire anything other than money
¨      His complaint did not involve collateral activities so he cant bring that up either
¨      Holding: Not a consumer because money is not a good
·         Ex. Dale ordered 1000 boxes of GS cookies
¨      Signs an agreement that gives GS lien on house
¨      Goes to bank for loan and he doesn’t get it even when they assured him he would
¨      Loses house
¨      Lack of standing even with misrepresentation
·         Ex. Same facts, gets a home equity loan, bank only pays enough for 100 boxes. Foreclosure occurs