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

Consumer Transactions
Professor Powers
Fall 2015
I)        Overview of the Texas Deceptive Trade Practices Act
a)       Drafting the DTPA
i)         Consumer credit legislation – 1967 (amended in 1969)
(1)     13 specific acts or practices were declared unlawful. General prohibition of all “false, misleading or deceptive acts or practices in the conduct of any trade or commerce.”
(2)     The Consumer Credit Commissioner was authorized to request the Attorney General to seek injunctions. Commissioner given pre-litigation investigation powers and the authority to accept an “assurance of voluntary compliance” without filing suit.
(3)     Civil penalties of $1,000 for violation of an injunction. Penalties were later increased to $10,000 for violation of an injunction.
(4)     Broad exemption provisions for public officials, the insurance industry, advertising media.
(5)     No private remedies.
ii)       Texas Deceptive Trade Practices-Consumer Protection Law – 1973 – Broad applicability, no-fault liability, and attractive remedial provisions, encourage attorneys to represent consumers.
*Compare fraud and DTPA – proof (much harder to prove fraud, which requires intent) and damages (more damages available under DTPA, encourages consumer to pursue a case).
(1)     20 specific acts or practices were declared unlawful.
(2)     The Consumer Protection Division of the Attorney General’s Office (rather than the Consumer Credit Commissioner) was given primary authority to enforce the Act. Could seek injunction and civil penalties.
(3)     No exemptions, except for the media.
(4)     More remedies:
(a)     Civil penalties of $2,000 per violation, up to $10,000 in the original enforcement action against the defendant.
(b)     Restitution or actual damages available.
(c)     Private cause of action for treble damages, court costs and attorneys’ fees for an consumer harmed by a deceptive act, a breach of an express or implied warranty, any unconscionable act, or a violation of the Insurance Code (Chapter 541).
(d)     Any waiver of DTPA remedies was “void and unenforceable.”
(e)     DTPA provisions were not exclusive and its remedies were in addition to other procedures or remedies provided for any other law.
(5)     Lower burden of proof on consumer:
(a)     Representations and advertisements could be unlawful if there was “capacity” or “tendency” to deceive, regardless of the seller’s “intent to deceive.” Proof of actual deception not required.
iii)      Tort Reform – 1995 and 2003
(1)     “Actual damages” replaced by more restrictive “economic damages.” Trebling of damages now requires a predicate finding of either “knowingly” or “intentional” behavior.
(2)     Punitive damages restricted to $200,000, or two times the amount of economic damages plus an amount not to exceed $75.000.
(3)     Standard of proof for punitive damages is clear and convincing evidence.
(4)     Venue rules require lawyers to file cases in the county where the plaintiff or defendant lives, or where the facts giving rise to the dispute occurred.
(5)     Eliminated causes of action for matters with a total value of more than $500,000. Eliminated causes of action for matters of more than $100,000 if claims based on a written contract if the plaintiff received independent legal advice prior to signing the contract.
(6)     Lawyers can file DTPA claims against professionals only where those claims involve misrepresentation, unconscionable conduct or breach of warranty.
(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.
b)       DTPA Consumer Action
i)         Three elements of DTPA consumer action (what you have to show):
(1)     The plaintiff is a “consumer” as defined in the statute (Section 17.45);
(2)     The defendant committed one of the four defined violations (Section 17.50); and
(3)     The violation was the producing cause of economic or mental anguish damages. 
Sec. 17.50. RELIEF FOR CONSUMERS.  Creates a private right of action for the injured consumer. 
(a) 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 or employment by any person of a false, misleading, or deceptive act or practice that is: (A) specifically enumerated in a subdivision of Subsection (b) of Section 17.46 [Deceptive Trade Practices Unlawful] (the “laundry list”) of this subchapter; 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 [Unfair Methods of Competition and Unfair or Deceptive Acts or Practices].
c)       Definition of “Consumer” – Consumer status gives the plaintiff standing to sue under the DTPA. A consumer is an individual or business (except for a business with assets over $25 million).
Sec. 17.45. DEFINITIONS. As used in this subchapter:
(4) “Consumer” means an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or 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 assets of $25 million or more.
(6) “Trade” and “commerce” mean the advertising, offering for sale, sale, lease, or distribution of any good or service, of any property, tangible or intangible, real, personal, or mixed, and any other article, commodity, or thing of value, wherever situated, and shall include any trade or commerce directly or indirectly affecting the people of this state.
d)       The Two-Part Test
i)         Cameron v. Terrell & Garrett, Inc. – Plaintiffs purchased a home that was listed by the defendant real estate agent. Defendant advertised the home as having 2400 square feet. Plaintiffs purchased the home in reliance on this statement and, when they discovered that the home had 155 less square feet, they sued under the DPTA. Under the DTPA, real estate is a good.
(1)     Holding – The Court held that plaintiffs were consumers within the meaning of § 17.45(4). The Court rejected the defendant’s arguments that there must be some privity requirement between the consumer and the seller of goods or services. Privity is not required; a contract between the plaintiff and defendant is not required. The DTPA should be construed liberally to protect the consumer, and real estate agents are specifical

gratuitous and incidental. The plaintiff offered no proof that she sought or acquired goods or services from either the building owner or the security company. There was no evidence of consumer status for their claim under the DPTA. Because the employee failed to show that she was more than an incidental beneficiary of the contract between the building owner and security company, summary judgment was proper.
(a)     Third Party No Standing (incidental beneficiary) – When the goods or services are purchased for the primary purpose of benefitting the business, and any use or benefit of those products extends to the employee only incidentally, the employee does not have standing to sue under the DTPA. The requirements for a third party to recover as beneficiary of a contract are:
(i)       The contracting parties intended to benefit the third party; and
(ii)     The contracting parties entered into the contract directly and primarily for the third party's benefit.
iii)      Incidental Beneficiary – To show that goods or services were purchased for a third party’s benefit and confer upon that person consumer status, it is necessary to show more than mere use of or benefit from the goods. A person claiming consumer status must be an intended and not incidental beneficiary.
(1)     Examples:
(a)     A passenger riding in a car is not a consumer with respect to the car.
(b)     A friend who borrows goods is not a consumer with respect to the goods.
(c)     An employee who occasionally uses goods is not a consumer with respect to the goods.
iv)     Class Examples
(1)     Williams v. Hills Fitness Center – Plaintiff injured while using gym equipment. The gym argued that the plaintiff was not a consumer because she did not buy anything or enter into a contract, she was merely visiting. The Court held that the plaintiff sought services, so she was a consumer. Don’t need consummate the transaction as long as you are seeking the goods or services.
(2)     P purchased gift specifically for his son, G. The gift was shipped directly to G. A purchase was made, G acquired the goods and received the benefit of it, and the gift was intended for G. G has consumer status.
(3)     R has a job at a loading a dock. The fork lift she used was defective, and she was injured. R was not an intended beneficiary of the equipment because the company purchased the fork lift for general use by employees. She was an incidental beneficiary. Look at person’s relationship to the transaction. R has no standing under the DTPA.
(4)     L leases his apartment to T. Because of the crime in the neighborhood, L hires a security service for T’s apartment. T’s apartment was burglarized and T sues the security service. T has standing because the security was intended to specifically benefit him.