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

 
Consumer Transactions
Professor Steiner
Spring 2015
 
Chapter 1: Introduction to the DTPA
 
Overview of the Texas Deceptive Trade Practices Act                                                                                                                                                
 
I.         Introduction
a.        DTPA is liberally construed, underlying purpose is to protect consumers
b.        DTPA 17.50 creates a private right of action for the injured consumer
                                             i.            A consumer may maintain an action where any of the following constitute a producing cause of economic damages or damages for mental anguish:
1.        The use/employment by any person of a false, misleading, or deceptive act or practice that is:
a.        On the laundry list; and
b.        Relied on by a consumer to the consumer’s detriment;
2.        Breach of express or implied warranty;
3.        Any unconscionable action or course of action by any person; or
4.        The use/employment by any person of an act or practice in violation of the Insurance Code
c.        Statement of elements:
                                             i.            Plaintiff is a “consumer” as defined in statute;
                                            ii.            Defendant committed one of the proscribed acts under § 17.50; and
                                          iii.            Defendant’s acts were the producing cause of consumer’s damages
II.       The Definition of “Consumer”
a.        One must establish consumer status in order to have standing to sue under DTPA
b.        Definition of consumer
                                             i.            An individual or business with less than $25 million in assets who
1.        Seeks or acquires
2.        By purchase or lease,
3.        Any goods or services
III.     The “Two-Part Test”
a.        In order to qualify as a consumer:
                                             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.        Seek or Acquire
                                             i.            You don’t actually have to purchase – just be seeking
1.        Requirements – must show
a.        Good faith intent to buy
b.        Ability to actually purchase
                                                                                                                     i.            Have to have an ability to purchase the good
                                                                                                                    ii.            No transfer of valuable consideration has to actually occur
2.        Proof, if challenged
                                            ii.            If merely borrowing something, no acquisition
                                          iii.            NO Privity Requirement – May be Purchased by someone else
1.        Its about relationship to transaction, not the contract
2.        Do not have to have privity, but must have relation to transaction
a.        Third party beneficiary can be consumer as long as transaction specifically required OR intended to benefit third party and the good/service was rendered to benefit third party
3.        Primary Intended Beneficiary vs. Incidental Beneficiary
a.        Primary Intended
                                                                                                                     i.            Employees of insurance policy purchased by employer
                                                                                                                    ii.            Cemetery buried wrong body, moved it . . . mother dealt with D, but mom and kids are consumers b/c services were intended for benefit of decedent’s immediate family
b.        Incidental
                                                                                                                     i.            Any benefit derived from purchase or lease of goods/services by person merely gratuitous and incidental to other person
1.        Hotel guest is incidental beneficiary of contract between hotel and security
2.        Good/service are purchase/lease for primary purpose of benefitting business and any use/benefit of those products extends only incidentally to employee, so employee is not consumer
3.        Will beneficiaries injured by estate counsel’s malpractice
4.        Employee is incidental beneficiary of contract between security and management company where hospital is located
                                          iv.            DTPA cause of action does not survive death or original consumer
1.        Not provided in statute
2.        Parents of dead child cannot sue for defective pool
3.        Consumer’s estate/individual beneficiaries of estate are not consumers themselves, so can’t pursue claim
                                            v.            DTPA claims cannot be assigned
1.        Purpose of DTPA is for aggrieved consumers to seek redress
2.        A downstream buyer could sue a remote seller for breach of an implied warranty, but cannot sue under DTPA
                                          vi.            There must be a “personal” aspect in being “duped” that does not pass to subsequent buyers the way a warranty does
c.        By Purchase or Lease
                                             i.            A gratuitous act is not a purchased good or service
1.        Free legal services à no consumer standing
                                            ii.            One does not have to pay for goods or services to be a consumer
1.        Seek repair of car under warranty obligating D to repair without compensation; P satisfies first prong even though no payment; warranty repairs necessarily a part of the car purchase
d.        Any Goods or Services
                                             i.            Goods
1.        Tangible chattels or real property purchased or leased for use
a.        Must be “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
1.        Lending of money not good/service
                                                                                                                  iii.            Distributorship agreements and stocks are intangible goods
2.        Money
a.        When borrower’s objective is to obtain good/service and the loan provides the means for obtaining the good/service, then the borrower qualifies as a consumer
b.        When borrower’s sole objective is a loan does not become a consumer merely because lender provides services incidental to loan that are not independent objectives of the transaction
c.        Arranging for a loan is not the same as seeking to acquire “goods” or “services” UNLESS there are collateral activities that constitute a service.
                                                                                                                     i.            Seeking a loan or a re-finance does not count.
                                                                                                                    ii.            Seeking the extension of credit does not suffice.
                                                                                                                  iii.            NOT INCIDENTAL: Financial Advice on when to borrow, whether to borrow, and how to structure financial arrangements of business operations.
1.        This financial advice constitutes an objective independent of the loan transaction.
                                            ii.            Services
1.        Work, labor, or service for purchase or lease for use, including services furnished in connection with the sale or repair of goods
2.        Purchase of services
a.        Actual transmission of services from one person to another by voluntary act or agreement (need valuable consideration)
b.        When borrower seeks services from lender as independent objective and not merely ancillary to loan, the borrower is a consumer with respect to the provision of services
c.        Activity related to loan transaction is a service only if activity at issue, from P’s point of view, is an objective of transaction and not merely incidental to it
3.        Key à whether borrower’s primary objective is solely to obtain loan, or to obtain goods/services
                                          iii.            Goods/service must be an objective of the transaction, not merely incidental to it
1.        Although title insurance is a service under DTPA, if basis of complaint is D refinanced too soon after initial home equity loan, P’s DTPA claim doesn’t implicate title insurance services provided by D, so there is no consumer status
 
Violations of the DTPA: Laundry List and Unconscionability                                                                                                                  
 
I.         The Laundry List (must know (5), (7), (12), (24))
a.        Except as provided in Sub (d), the term “false, misleading, or deceptive acts or practices” includes, but is not limited to, the following acts:
                                                               i.      (5) 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;
                                                              ii.      (7) 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;
                                                            iii.      (12) Representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law;
                                                            iv.      (24) Failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed;
b.        Basic Violations
                                                               i.      Proving DTPA laundry list isn’t the same thing as proving common law fraud
                                                              ii.      A misrepresentation is actionable so long as it is of material fact and not merely puffing/opinion
1.        Actionable à excellent condition, perfect condition, just like new (Pennington v. Singleton)
2.        For (5) and (7), defendant’s knowledge is irrelevant
a.        Knowingly only needed for additional damages and mental anguish
3.        Quality
a.        Measure of degree; standard/grade (eggs/meat), or style/model (machinery); can describe with general words of quality; excellent, perfect indicate high degree of quality
4.        Factors to determine whether statement is opinion or actionable misrepresentation:
a.        Specificity vs. vagueness of statement
                                                                                                                                       i.      Imprecise or vague representation constitutes a mere opinion
b.        Comparative knowledge of the buyer and seller
c.        Whether representation relates to past, present of future condition
                                                                                                                                       i.      Representations concerning past or present conditions require greater scrutiny than those concerning future conditions because predictions tend more toward opinion
5.        Examples
a.        Represent that food is vegan = affirmative fact
b.        Car is “completely fixed” = affirmative f

et business interruption insurance to cover his own failure to maintain his license. Agent promises to do so, but does not.  Dale suffers losses when he fails to maintain.  To prove producing cause, Dale must show agent was substantial cause in bringing about his injury and to do so he’ll have to prove agent could have procured this type of insurance.
 
Venue                                                                                                                                                                                                                                   
 
I.         General Rule, all lawsuits shall be brought:
a.        In the county in which all or a substantial part of the events or omissions giving rise to the claim occurred;
b.        In the county of defendant’s residence at the time the cause of action accrued if defendant is a natural person;
c.        In the county of the defendant’s principal office in this state, if the defendant is not a natural person
II.       Breach of Warranty by Manufacturer – CPRC 15.033
a.        A suit for breach of warranty by a manufacturer of consumer goods may be brought in any county in which all or a substantial part of the events or omissions giving rise to the claim occurred, n the county in which the manufacturer has its principal office in this state, or in the county in which the plaintiff resided at the time the cause of action accrued
III.     DTPA 17.56 – Venue
a.        An action brought under this subchapter may be brought:
                                             i.            Following the General Rule; or
                                            ii.            In a county in which the defendant or an authorized agent of the defendant solicited the transaction made the subject of the action at bar
 
Chapter 1: Case Law and Class Notes
·         If each child was intended beneficiary of funeral service; then each child is a consumer and can recover. Service Corporation International
·         A gratuitous act is not a purchased good or service under DTPA, so no “consumer” status. Rayford v. Maselli
·         A cash transfer is not dispositive; if the damage occurred in connection with consumer transaction then “consumer” status. Star Houston
·         Money not tangible chattel; absent a claim concerning collateral activities getting a bank loan does not confer consumer status. Riverside
o    Determining factor is whether the borrower’s “objective” is solely to obtain a loan or to obtain a good or service. American General Finance
·         Can only bring a DTPA claim against title insurance company only if the title insurance services form the basis of the claim. Flagstar Bank
·         Innocent misrepresentations are actionable. Pennington
·         West Anderson Plana: what standards should courts use to decide whether statements about contractual rights and obligations fall under §17.46(b)(12):  FACTORS:
o    Whether the representation was clearly factual, clearly interpretive, or some less clear combination of the two;
o    Whether the relevant contractual language was ambiguous or unambiguous;
o    Whether the parties were in a substantially equal position of knowledge and information;
o    Whether there was evidence of overreaching or victimizing;
o    Whether there was evidence of unconscionable conduct;
o    Whether there was a confidential or fiduciary relationship between the parties.
·         If someone-else paid, then you need to be the intended beneficiary.
·         TIP: if something is said by seller; look for (1) express warranty, (2) DTPA misrepresentation. If nothing said à look for implied warranty.
·         There is no such thing as a “garage sale” exception. Pennington is law.
·         “merely repeating previous owner’s statement’s” is not an exception.
 
Chapter 2: Breach of Warranty and the DTPA
 
The Relationship of the DTPA to the Law of Warranty                                                                                                                                              
 
I.         Have COA if there is a breach of an express or implied warranty that is the producing cause of economic damages or damages for mental anguish
a.        A consumer may file ordinary breach of warranty claim and also sue under DTPA to get DTPA remedies
II.       DTPA does not define “warranty”
a.        DTPA does not create any warranties . . . a warranty must be established independent of the act by either common law or statutory law
b.        Generally use UCC of goods and common law for services
                                             i.            Therefore, disclaimers and limitations of liability and different notice requirements are imported into DTPA
III.     Elements:
a.        Consumer status;
b.        Existence of a warranty;
c.        Breach of warranty; and
d.        Breach was producing cause of damages
                                             i.            Burden of proof = scintilla of evidence