TBE--T/G & C.R (Consumer Rights) Flashcards
02/14 #12:
On November 1, Pablo contacted Alex, an insurance agent who represented Insco, an insurance company. Pablo requested that his newly licensed minor son, Sam, be added to the automobile insurance policy Pablo maintained with Insco. Alex quoted the amount of the additional premium, and Pablo sent a check in that amount to Alex.
On November 10, when Pablo received his regular annual bill and renewal notice from Insco, he noticed that Sam was not listed as an insured driver. He immediately called Alex, who reassured Pablo that the paperwork had been submitted to Insco, that Sam had been added to the policy, and that an updated policy would arrive in a few days.
Unbeknownst to Pablo, on October 15, Alex had received word from Insco that his agency was being terminated effective November 15. Also unbeknownst to Pablo, on November 10, Insco had returned to Alex the paperwork that he had submitted to Insco adding Sam to Pablo’s policy because the paperwork was so
deficient that it required “further detail.”
After Pablo’s November 10 telephone call with Alex, Pablo told Sam he could drive.
On November 11, while driving to school, Sam failed to stop at a red light and collided with another vehicle. Sam was not hurt, but his car was a total loss, and the driver in the other vehicle sustained injuries that required hospitalization. On the same day, as soon as Pablo heard about the accident, he contacted Insco to report the accident and the property damage to Sam’s car. Insco, without investigating the circumstances, told Pablo that it had no record of Sam being added as a covered driver and, therefore, there was no coverage for the property damage or any other claim arising out of the accident. Insco also told Pablo that Alex was no longer an agent for Insco, and Insco could not be held liable for any of Alex’s actions.
On November 14, Pablo was served with a personal injury lawsuit filed by the driver of the other vehicle involved in the accident with Sam. Pablo promptly forwarded the lawsuit to Insco, but Insco denied coverage
for the lawsuit without further explanation. Quite distressed by Insco’s denial of coverage, Pablo engaged the services of an attorney to handle the lawsuit.
What rights and remedies, if any, does Pablo have against Insco under Texas consumer
protection laws? Explain fully.
Under chapter 541 of the Texas Insurance Act, a person may bring a claim against an insurance company for
- false, deceptive, misleading, or fraudulent representations;
- a violation of express or implied warranties,
- unconscionability.
A claim under the Texas Insurance Act automatically triggers a claim under the Deceptive Trade Practices Act. However, a person must be classified as a consumer to bring a cause of action under the DTPA. A consumer is someone who seeks or purchases goods or services.
Under chapter 541 of the Texas Insurance Act and the DTPA, a consumer affected by the adverse actions of an insurance company may bring a claim against the company under the laundry list of items of the DTPA. The laundry list includes fraudulent, deceptive, and misleading statements and actions that the consumer relied on.
Chapter 541 also allows an insurance consumer to file a DTPA claim against an insurance company if the insurance company or its representative acted with unconscionability in its dealings with the consumer. “Unconscionability” is defined as dealing with someone in a “grossly unfair manner” in a way that takes advantage of the consumer’s lack of knowledge.
Chapter 541 of the insurance code allows someone to bring a claim against an insurance company for breach of an express warranty. An express warranty is a warranty that the representative of the insurance company communicates to the consumer and that the consumer relies on
Under Texas Insurance Law, an insurance company has an obligation to investigate an accident before denying coverage of the accident.
Under Chapter 541 of the Texas Insurance Code, an insurance company also has a duty to promptly deny liability coverage of a claim. An insurance company must provide a policy owner with a written denial of the claim within 15 days of when the policy owner submits a claim.
DAMAGES
Under Chapter 541 of the Insurance Code and the DTPA, Pablo has remedies in the form of actual damages, reasonable attorney fees. Actual damages under Chapter 541 and the DTPA include any economic damages as well as damages for mental anguish. Actual damages and economic damages are pecuniary damages. Mental anguish damages are damages available for severe mental distress which is described as substantially interfering with the daily routine of the person filing the claim. “Knowingly” means that the insurance agency and company knew that the statements they made to a consumer were false. Additionally, Pablo might be able to receive three times both his actual damages and any mental anguish damages if he can show that Insco or Alex as Insco’s agent acted intentionally made misrepresentations to him regarding his policy. “Intentionally” means making misrepresentations with the knowledge that the person to whom they are made will rely on them.
07/13 #8:
Peter purchased a disability income insurance policy from lnsureco, an insurance company doing business in Texas. The policy provided that, in the event Peter was disabled and unable to work, he would
receive a monthly benefit equal to his regular salary for the length of his disability.
About a year after he obtained the policy, Peter was involved in an automobile accident that left him with a serious back injury. After a thorough medical examination, Peter’s doctor determined that Peter’s medical condition would require on-going treatment, and that Peter was totally disabled and would be unable to return work for at least 12 months.
Peter submitted a proper notice of claim with all other required medical documentation to lnsureco and requested payment of the monthly benefits under the policy.
After a month passed without hearing anything from Insureco, Peter called to check on the status of his claim. Peter spoke with Albert, an agent oflnsureco, who told him that he was in charge of reviewing Peter’s
claim and that:
- -Insureco was aware of his “debilitating injury,” but had not gotten around to reviewing the claim or the information Peter had provided;
- -As a matter of company practice, Insureco always took at least six months to complete its review of a “total disability” claim, regardless of the information provided in support of the claim; and
- -Insureco wouldn’t pay on the claim if Peter had other insurance that applied, even though this condition was not set forth in the policy.
Peter explained to Albert that, in addition to daily living expenses, he had a monthly home mortgage payment, as well as a car loan payment to make and that, without the disability benefits, he was at risk for foreclosure and repossession. Albert told Peter those were his problems and that he would get back to him when he “got around to it.”
Over the next several months, Peter began receiving foreclosure and repossession notices on his house and car, and he made numerous frantic telephone calls to Albert, who never returned the calls.
Six months after Peter submitted his claim, he finally received a one-sentence letter from Insureco saying that his claim was being denied, but providing no further explanation. Peter immediately called Albert, who said that he never finished reviewing Peter’s claim or conducted any investigation. He explained that, once he recognized Peter’s doctor as the same doctor who had been involved in a prior “total disability” claim filed with lnsureco, denial of the claim was automatic, due to “suspicious circumstances.”
Peter was forced to file for bankruptcy in order to prevent foreclosure on his house and repossession of his car and his credit rating was negatively impacted. In addition, Peter was so deeply upset and stressed by the handling and denial of his claim that he had to be placed under the care of a psychiatrist.
What violations, if any, of applicable Texas consumer protection laws were committed by
Insureco and Albert, and what recovery might Peter obtain as a result thereof? Explain fully.
The DTPA is designed to protect consumers from deceptive business practices and misrepresentations.
A person is a consumer if he sought or acquired goods or services for lease or purchase. A service includes insurance coverage. A consumer has a cause of action under the DPTA for
(1) violation of the DTPA laundry list, a list of prohibited misrepresentations and practices,
(2) breach of warranty,
(3) unconscionable acts or course of conduct,
(4) violations of the Insurance Code, and
(5) violations of other tie-in statutes.
Laundry list
A defendant may not represent that an agreement confers rights or remedies when the agreement does not. The misrepresentation need not be intentional or knowing. However, the plaintiff must show that he relied to his detriment on the misrepresentation.
Unconscionability
A defendant is liable for unconscionable conduct when the defendant takes advantage of the consumer’s lack of knowledge or expertise to an unfairly gross degree. The behavior must be flagrant, glaring, and unmitigated. Generally, a claim for unconscionability arises out of a consumer’s technical lack of knowledge with regard to a machine or device.
Insurance Code violations
Under the Insurance Code, any person seeking or obtaining insurance coverage or policy may recover against any other person involved in selling insurance. Generally, if a plaintiff is a consumer under the DTPA, the plaintiff is also a person under the Insurance Code. Under the Insurance Code, an insurance is prohibiting from misrepresenting the terms of a policy as well as the extent of its coverage or benefits. It may not circulate false information as well. Additionally, an insurance company violates the Insurance Code if it
(1) does not approve or deny a claim within a reasonable amount of time,
(2) denies a claim without conducting a reasonable investigation,
(3) does not respond to an insured’s inquiries in a reasonable amount of time,
(4) if it fails to provide a reasonable explanation of a denial of a claim the Insurance Code, or
(5) if it fails to pay out a claim after liability has become reasonably clear.
07/13 #8:
Peter purchased a disability income insurance policy from lnsureco, an insurance company doing business in Texas. The policy provided that, in the event Peter was disabled and unable to work, he would
receive a monthly benefit equal to his regular salary for the length of his disability.
About a year after he obtained the policy, Peter was involved in an automobile accident that left him with a serious back injury. After a thorough medical examination, Peter’s doctor determined that Peter’s medical condition would require on-going treatment, and that Peter was totally disabled and would be unable to return work for at least 12 months.
Peter submitted a proper notice of claim with all other required medical documentation to lnsureco and requested payment of the monthly benefits under the policy.
After a month passed without hearing anything from Insureco, Peter called to check on the status of his claim. Peter spoke with Albert, an agent oflnsureco, who told him that he was in charge of reviewing Peter’s
claim and that:
- -Insureco was aware of his “debilitating injury,” but had not gotten around to reviewing the claim or the information Peter had provided;
- -As a matter of company practice, Insureco always took at least six months to complete its review of a “total disability” claim, regardless of the information provided in support of the claim; and
- -Insureco wouldn’t pay on the claim if Peter had other insurance that applied, even though this condition was not set forth in the policy.
Peter explained to Albert that, in addition to daily living expenses, he had a monthly home mortgage payment, as well as a car loan payment to make and that, without the disability benefits, he was at risk for foreclosure and repossession. Albert told Peter those were his problems and that he would get back to him when he “got around to it.”
Over the next several months, Peter began receiving foreclosure and repossession notices on his house and car, and he made numerous frantic telephone calls to Albert, who never returned the calls.
Six months after Peter submitted his claim, he finally received a one-sentence letter from Insureco saying that his claim was being denied, but providing no further explanation. Peter immediately called Albert, who said that he never finished reviewing Peter’s claim or conducted any investigation. He explained that, once he recognized Peter’s doctor as the same doctor who had been involved in a prior “total disability” claim filed with lnsureco, denial of the claim was automatic, due to “suspicious circumstances.”
Peter was forced to file for bankruptcy in order to prevent foreclosure on his house and repossession of his car and his credit rating was negatively impacted. In addition, Peter was so deeply upset and stressed by the handling and denial of his claim that he had to be placed under the care of a psychiatrist.
Under Texas consumer laws, does Peter have any claim on which he might recover punitive, additional or exemplary damages? Explain fully.
Under the DTPA, a consumer may recover economic damages for violations that are the producing cause of his harm.
Economic damages includes lost wages, medical expenses, and any other form of penuicary loss.
Additionally, upon a showing that the defendant’s conduct was intentional or knowing, a plaintiff may recover damages for mental anguish as well as additional discretionary damages.
A plaintiff may recover damages for mental anguish i.e. pain and suffering, if he can show that the violation caused him stress and anxiety to the extent that it substantially interfered with his daily routine.
Additionally, the Insurance Code provides for broader remedies. For violations of the Insurance Code, a plaintiff may recover actual damage (i.e. economic damages plus mental anguish and other provable damages), regardless of a showing of intentional or knowing misconduct.
Additionally, because the conduct is knowing or intentional, Peter can recover additional discretionary damages - for a knowing violation, he can recover up to three times economic damages and for an intentional violation, he can recover up to three times actual damages.
Additionally, under Chapter 542 of the Insurance Code a person may recover an 18% penalty if an insurance company does not timely acknowledge (5 days), begin an investigation of the claim (15 days), approve or deny a claim (15 days may be extended to 45 days, depending on investigation), or pay out a claim when liability has become reasonably clear (5 days).
Peter will be entitled to the penalty as well because Insureco violated a substantial amount of the Code.
Finally, a prevailing consumer is entitled to all reasonably necessary attorney’s fees.
02/13 #11:
Carolina works as a computer programmer in a small three-person company in Austin. As a result of a sudden illness, Carolina required an extensive stay in the hospital and incurred significant medical bills. Carolina was unable to work for several months and not able to immediately pay the medical bills from her
hospitalization.
After returning to work, Carolina began receiving statements in the mail at her home from City Hospital (“Hospital”), requesting immediate payment of the unpaid medical bills. Unable to make any payments, Carolina ignored the statements. Then, she began to receive messages on her home voicemail from Dan, who was employed in Hospital’s accounting department. Dan’s messages stated he was calling from the “Credit Bureau” regarding collection of the unpaid medical bills. The calls became more frequent and would occur early in the morning, before 6 a.m., and late at night, after I I p.m.
Carolina finally called Dan back and explained that she was not able to pay the bills at this time. Dan told her that unless the bills were immediately paid in full , the Credit Bureau was going to sue her for the unpaid bills in court, file criminal charges against her, and have her arrested and ·’thrown in jail for a very long time.’’ Dan also told Carolina that she was the “type of deadbeat” that was the cause of the high cost of healthcare and that. if payment was not received in full within a week, she could expect a police officer to
come to her home. After Carolina hung up the phone, she received an email from Dan stating that she would end up in “debtor’s prison” if she didn’t take care of the unpaid bills immediately.
The telephone conversation and email with Dan upset Carolina so much that she developed a debilitating migraine headache and did not go into work the next day. Instead, Carolina went in to see her doctor, who diagnosed her with a severe migraine headache caused by stress, prescribed her pain medication and ordered her to remain out of work for three days.
The next day, Dan called Carolina’s office and asked to speak to her “supervisor.” Ellen, who was Carolina’s supervisor and the sole proprietor of the small company where Carolina worked, took the call. Dan told Ellen that Carolina o·wed Hospital a lot of money, was in ‘·serious legal trouble” and would “likely go to jail for a long time’’ if the outstanding bills were not paid immediately. Dan also threatened that Hospital could sue Ellen and her company directly over the unpaid bills, since Carolina was working there at the time the charges were incurred.
Distraught over the telephone call, Ellen immediately called Carolina at home and told her that the company was too small to take the risk of expensive legal action and that Carolina’s employment was therefore terminated.
As a direct consequence of Carolina’s termination and the loss of her services, the company was unable to complete a major contract for its main customer and lost the contract.
Did Dan’s acts expose Hospital to liability for violation of the Texas Debt Collection Act
(“Act”), and, if so, what were the violations? Explain fully.
The TDCA applies to debt collectors of all kinds, including creditor debt collectors, collecting any kind of debt.
The TDCA provides an exclusive list of potential violations for which an action may be brought under the Act, including:
(1) Threats or coercion,
(2) harassment or abuse,
(3) Unconscionable acts or conduct, and
(4) false or misleading statements.
Although as to threats or coercion, the ability to threaten a debtor with legal action is specifically protected (a collector may do so), a debt collector is never able to threaten any actions that are illegal or not within the scope of the law, such as jail time (there is no prison time for debts or criminal liability), arrest, or other unlawful remedies to which the debtor is not entitled.
Harassment or abuse specifically includes harassing phone calls (phone calls made before 7 am or after 9 pm) or phone calls in excessive quantities, and also includes phone calls made to a debtor’s workplace when the debt collector is aware that such calls are prohibited.
As to unconscionable acts or conduct, such conduct includes harassing words or verbal abuse, with significant overlap with the other categories under the exclusive list.
The final category, false or misleading statements, includes representations that an individual is calling from a fake company, is an attorney when the individual is in fact not an attorney, or any other false statements made in the course of attempting to collect the debt. A debt collector may not communicate with a third party regarding a debtor’s debt; he may only do so in order to obtain information regarding the debtor’s whereabouts.
02/13 #11:
Carolina works as a computer programmer in a small three-person company in Austin. As a result of a sudden illness, Carolina required an extensive stay in the hospital and incurred significant medical bills. Carolina was unable to work for several months and not able to immediately pay the medical bills from her
hospitalization.
After returning to work, Carolina began receiving statements in the mail at her home from City Hospital (“Hospital”), requesting immediate payment of the unpaid medical bills. Unable to make any payments, Carolina ignored the statements. Then, she began to receive messages on her home voicemail from Dan, who was employed in Hospital’s accounting department. Dan’s messages stated he was calling from the “Credit Bureau” regarding collection of the unpaid medical bills. The calls became more frequent and would occur early in the morning, before 6 a.m., and late at night, after I I p.m.
Carolina finally call ed Dan back and explained that she was not able to pay the bills at this time. Dan told her that unless the bills were immediately paid in full , the Credit Bureau was going to sue her for the unpaid bills in court, file criminal charges against her, and have her arrested and ·’thrown in jail for a very long time.’’ Dan also told Carolina that she was the “type of deadbeat” that was the cause of the high cost of healthcare and that. if payment was not received in full within a week, she could expect a police officer to
come to her home. After Carolina hung up the phone, she received an email from Dan stating that she would end up in “debtor’s prison” if she didn’t take care of the unpaid bills immediately.
The telephone conversation and email with Dan upset Carolina so much that she developed a debilitating migraine headache and did not go into work the next day. Instead, Carolina went in to see her doctor, who diagnosed her with a severe migraine headache caused by stress, prescribed her pain medication and ordered her to remain out of work for three days.
The next day, Dan called Carolina’s office and asked to speak to her “supervisor.” Ellen, who was Carolina’s supervisor and the sole proprietor of the small company where Carolina worked, took the call. Dan told Ellen that Carolina o·wed Hospital a lot of money, was in ‘·serious legal trouble” and would “likely go to jail for a long time’’ if the outstanding bills were not paid immediately. Dan also threatened that Hospital could sue Ellen and her company directly over the unpaid bills, since Carolina was working there at the time the charges were incurred.
Distraught over the telephone call, Ellen immediately called Carolina at home and told her that the company was too small to take the risk of expensive legal action and that Carolina’s employment was therefore terminated.
As a direct consequence of Carolina’s termination and the loss of her services, the company was unable to complete a major contract for its main customer and lost the contract.
What rights and civil remedies, if any, does Carolina have under the Act against Hospital? Explain fully.
Under the TDCA, a debt collector who is found to have violated the terms of the statute is liable to a debtor for actual damages, injunctive relief and attorney’s fees. Actual damages are defined as damages that were available under the common law, and include, inter alia, economic damages, pain and suffering, mental anguish and lost wages. In addition to actual damages, the TDCA provides for injunctive relief and the recovery of reasonable attorney’s fees. The TDCA provides that a debtor can also plead any violations of the statute through the DTPA, which is beneficial because the DTPA provides for “additional damages” that are discretionary by the fact finder of up to three times a party’s actual damages (the DTPA normally provides for only economic damages, however, since it is a TDCA violation in this case, actual damages would be recoverable).
CHECK WITH BARBRI ANSWER
02/13 #11:
Carolina works as a computer programmer in a small three-person company in Austin. As a result of a sudden illness, Carolina required an extensive stay in the hospital and incurred significant medical bills. Carolina was unable to work for several months and not able to immediately pay the medical bills from her
hospitalization.
After returning to work, Carolina began receiving statements in the mail at her home from City Hospital (“Hospital”), requesting immediate payment of the unpaid medical bills. Unable to make any payments, Carolina ignored the statements. Then, she began to receive messages on her home voicemail from Dan, who was employed in Hospital’s accounting department. Dan’s messages stated he was calling from the “Credit Bureau” regarding collection of the unpaid medical bills. The calls became more frequent and would occur early in the morning, before 6 a.m., and late at night, after I I p.m.
Carolina finally call ed Dan back and explained that she was not able to pay the bills at this time. Dan told her that unless the bills were immediately paid in full , the Credit Bureau was going to sue her for the unpaid bills in court, file criminal charges against her, and have her arrested and ·’thrown in jail for a very long time.’’ Dan also told Carolina that she was the “type of deadbeat” that was the cause of the high cost of healthcare and that. if payment was not received in full within a week, she could expect a police officer to
come to her home. After Carolina hung up the phone, she received an email from Dan stating that she would end up in “debtor’s prison” if she didn’t take care of the unpaid bills immediately.
The telephone conversation and email with Dan upset Carolina so much that she developed a debilitating migraine headache and did not go into work the next day. Instead, Carolina went in to see her doctor, who diagnosed her with a severe migraine headache caused by stress, prescribed her pain medication and ordered her to remain out of work for three days.
The next day, Dan called Carolina’s office and asked to speak to her “supervisor.” Ellen, who was Carolina’s supervisor and the sole proprietor of the small company where Carolina worked, took the call. Dan told Ellen that Carolina o·wed Hospital a lot of money, was in ‘·serious legal trouble” and would “likely go to jail for a long time’’ if the outstanding bills were not paid immediately. Dan also threatened that Hospital could sue Ellen and her company directly over the unpaid bills, since Carolina was working there at the time the charges were incurred.
Distraught over the telephone call, Ellen immediately called Carolina at home and told her that the company was too small to take the risk of expensive legal action and that Carolina’s employment was therefore terminated.
As a direct consequence of Carolina’s termination and the loss of her services, the company was unable to complete a major contract for its main customer and lost the contract.
What rights and civil remedies, if any, does Ellen have under the Act against Hospital?
Explain fully.
A third party may recover against the debt collector for improper debt collection practices as long as the debt collector’s communication or violation reached that third party and the third party has suffered actual damages.
CHECK WITH BARBRI ANSWER
Act applies to any “person” injured as consequence of violation of the Act. The law doesnt distinguish btw remedies available to consumer and to any other person who asserts a violation of the Act. Therefore, Ellen may recover actual damages, injunctive relief, and atty fees reasonably related to the amount of work performed and costs.
The issue is whether all of Ellen’s damages are compensable under the definition of actual damages.
Actual damages broadly defined and includes economic and noneconomic damages.
“tie-in” Statute?
02/13 #11:
Carolina works as a computer programmer in a small three-person company in Austin. As a result of a sudden illness, Carolina required an extensive stay in the hospital and incurred significant medical bills. Carolina was unable to work for several months and not able to immediately pay the medical bills from her
hospitalization.
After returning to work, Carolina began receiving statements in the mail at her home from City Hospital (“Hospital”), requesting immediate payment of the unpaid medical bills. Unable to make any payments, Carolina ignored the statements. Then, she began to receive messages on her home voicemail from Dan, who was employed in Hospital’s accounting department. Dan’s messages stated he was calling from the “Credit Bureau” regarding collection of the unpaid medical bills. The calls became more frequent and would occur early in the morning, before 6 a.m., and late at night, after I I p.m.
Carolina finally call ed Dan back and explained that she was not able to pay the bills at this time. Dan told her that unless the bills were immediately paid in full , the Credit Bureau was going to sue her for the unpaid bills in court, file criminal charges against her, and have her arrested and ·’thrown in jail for a very long time.’’ Dan also told Carolina that she was the “type of deadbeat” that was the cause of the high cost of healthcare and that. if payment was not received in full within a week, she could expect a police officer to
come to her home. After Carolina hung up the phone, she received an email from Dan stating that she would end up in “debtor’s prison” if she didn’t take care of the unpaid bills immediately.
The telephone conversation and email with Dan upset Carolina so much that she developed a debilitating migraine headache and did not go into work the next day. Instead, Carolina went in to see her doctor, who diagnosed her with a severe migraine headache caused by stress, prescribed her pain medication and ordered her to remain out of work for three days.
The next day, Dan called Carolina’s office and asked to speak to her “supervisor.” Ellen, who was Carolina’s supervisor and the sole proprietor of the small company where Carolina worked, took the call. Dan told Ellen that Carolina o·wed Hospital a lot of money, was in ‘·serious legal trouble” and would “likely go to jail for a long time’’ if the outstanding bills were not paid immediately. Dan also threatened that Hospital could sue Ellen and her company directly over the unpaid bills, since Carolina was working there at the time the charges were incurred.
Distraught over the telephone call, Ellen immediately called Carolina at home and told her that the company was too small to take the risk of expensive legal action and that Carolina’s employment was therefore terminated.
As a direct consequence of Carolina’s termination and the loss of her services, the company was unable to complete a major contract for its main customer and lost the contract.
What rights and civil remedies, if any, do Carolina and Ellen have under Texas common law? Explain fully.
Texas common law includes a tort for unreasonable debt collection, as well as intentional infliction of emotional distress.
Carolina and Ellen can also bring suit under the common law tort of wrongful debt collection for any abusive, deceptive, or otherwise wrongful conduct committed by Dan in his attempt to collect Carolina’s debt.
Again, Hospital will also be vicariously liable for the acts of Dan. However, it is unclear whether Ellen can rely on the tort because she is not the debtor. If a common law action is brought, the available remedies will be an injunction (must prove substantial harm), and actual damages. They can also recover for intentional infliction of emotional distress for Dan’s extreme and outrageous comments and Carolina can recover for defamation, but negligent IED is not recognized in Texas (Dan acted intentionally anyways).
07/12 #3:
Peter searched online for a wedding gift for his son, George, and found a website for a local business called Discount Appliances (“Discount”). The website contained photos of washers and dryers for sale and included the following statements on the homepage: “All merchandise in LIKE NEW condition’’ and “customer Satisfaction Guaranteed!” The prices of the washers and dryers were listed next to the photos and were substantially less than the prices of new washers and dryers.
Peter called the telephone number listed on the website and spoke with Roger, a Discount representative. Roger explained that the washers and dryers were “ practically brand new,” had “never been used,” and had “only minor cosmetic scratches and dents.” Roger also told Peter not to worry about
purchasing online because the washers and dryers were subject to an “absolute 30-day Money Back Guarantee.”
After speaking with Roger, Peter went back online to the Discount website and selected a washer and dryer to buy for George. Peter filled out the online order form by typing in his name and address as the purchaser, and indicated that the appliances were to be delivered directly to George’s address.
At the bottom of the online order form, in small type, was the following statement: “Merchandise sold AS IS–No warranties. Purchaser waives all claims and assumes all risks and liabilities.’’
Discount delivered the washer and dryer to George’s home. The first time George used the washer, it leaked water and caused serious damage to George’s wood floor.
George immediately called an appliance repair shop and a service specialist was sent to look at the washer. After inspecting the appliances, the service specialist informed George that both the washer and dryer
showed signs of heavy use. In particular, the washer had worn hoses and a rusted and cracked tub that was the clear cause of the water leak.
George called Peter and told him what happened. Peter called Roger and explained the situation. Roger told Peter that there was nothing Discount could do because of the written statement at the bottom of the online order form. When Peter reminded Roger about their prior telephone conversation, Roger said that he was just expressing his opinion. When Peter asked about the “30-Day Money Back Guarantee,” Roger admitted that, “Yeah, we always say that, but we don’ t really have a guarantee since our prices are so low.” Peter followed up by sending a letter to Discount demanding a refund.
As a result of the damage caused by the leak, George had to completely replace the floor in his house and missed two weeks of work overseeing the repairs.
What claims under the Texas Deceptive Trade Practices Act (“DTPA”), if any, can Peter
make against Discount and Roger? Explain fully.
(a) Peter may assert claims against Discount and Roger under the DTPA for a violation of the
laundry list,
unconscionability, and
breach of express warranty.
Whether Peter’s claims may be successfully asserted depends upon his status as a consumer under the DTPA, and whether he can establish a legal and factual basis for the claims.
To be a consumer, the entity asserting consumer status must seek or acquire goods or services by purchase or lease. There is no requirement that the entity that acquires the goods must also pay for the goods.
To establish a laundry list claim, the consumer must show that a misrepresentation was made or there was a failure to disclose information, and that it was relied on.
To establish a claim for unconscionability, the consumer must show that the seller took advantage of him to a grossly unfair degree.
To establish a breach of warranty claim under the DTPA, the consumer must show that a warranty was formed outside of the DTPA, that it was not disclaimed, and that the consumer is a proper entity to assert a claim for breach of that warranty.
A consumer may assert a claim under the DTPA against any entity that violated the Act in connection with his transaction.
In this case, Peter sought to purchase a washer and dryer. Therefore, he is a consumer. Peter spoke with Roger and was told the appliances were “practically brand new,” had “never been used,” and had “only minor cosmetic scratches and dents.” Roger also told Peter not to worry about purchasing online because the washers and dryers were subject to an “Absolute 30-Day Money Back Guarantee.” These statements were made directly in connection with Peter’s transaction as statements of fact, and were not mere opinion or puffing. In reliance on these statements, Peter decided to purchase the products from Discount’s website. The defendants may try to argue that the “as is” clause negated any reliance; however, that is not the effect of a simple “as is” clause that does not mention reliance. As discussed below in connection with warranty, such clauses merely operate to negate implied warranties. Because the products were not as represented and there was not a money back guarantee, the statements are actionable under the DTPA.
Because Roger individually made these statements directly to Peter, Peter may maintain a claim under the DTPA against Roger individually.
Additionally, because Roger made these statements as an agent of Discount, Peter has a claim against Discount under the laundry list for misrepresentation based on Roger’s representations.
The Discount website also stated, “All merchandise in LIKE NEW condition” and “Customer Satisfaction Guaranteed!” These statements appear to have been made as statements of fact and were false. Although “like new” could be considered puffing, and thus not actionable, “satisfaction guaranteed” would lead a consumer to believe that the product could be returned if it was not acceptable, which, in fact, was false. This statement could give rise to an additional claim against Discount under the laundry list.
Peter also may have a claim against Roger based on unconscionability.
Roger appears to know he has superior knowledge and experience, and took advantage of Peter’s inability to verify what he was told. If Peter could show that he was taken advantage of to a grossly unfair degree, he could prevail on an unconscionability claim. It also may be argued that the unconscionable action of an agent can be imputed to the principal. If that is the case, Peter may assert his unconscionability claims against Discount, as well as Roger.
Peter also may have a claim based on breach of warranty.
Although there generally are no implied warranties in the sale of used goods, Roger’s statement, “Absolute 30-Day Money Back Guarantee,” made on behalf of the seller, Discount, appears to be a factual promise regarding the goods. Because this statement was relied on by Peter and became a basis of the bargain, under the DTPA it could constitute an express warranty of the seller. As noted above, any breach of warranty is actionable by a consumer under the DTPA, and may be asserted against the seller, Discount.
Finally, Discount’s website stated, “Merchandise sold AS IS—No warranties. Purchaser waives all claims and assumes all risks and liabilities.” Discount may argue that this language disclaimed all warranties and waived DTPA liability.
Warranties asserted under the DTPA are subject to limitations and disclaimers generally applicable outside of the DTPA. Under the UCC, an “as is” clause such as this one may waive implied warranties if it is conspicuous, but does not disclaim conflicting express warranties.
Because the warranty at issue is an express warranty, the “as is” clause has no effect. Additionally, although the clause states that the purchaser “waives” all claims, waivers under the DTPA are generally unenforceable and void.
For a DTPA waiver to be enforceable, the waiver language must comply with the DTPA, be signed by the consumer, and the consumer must be represented by an attorney. In this case, the attempted waiver is unenforceable.
07/12 #3:
Peter searched online for a wedding gift for his son, George, and found a website for a local business called Discount Appliances (“Discount”). The website contained photos of washers and dryers for sale and included the following statements on the homepage: “All merchandise in LIKE NEW condition’’ and “customer Satisfaction Guaranteed!” The prices of the washers and dryers were listed next to the photos and were substantially less than the prices of new washers and dryers.
Peter called the telephone number listed on the website and spoke with Roger, a Discount representative. Roger explained that the washers and dryers were “ practically brand new,” had “never been used,” and had “only minor cosmetic scratches and dents.” Roger also told Peter not to worry about
purchasing online because the washers and dryers were subject to an “absolute 30-day Money Back Guarantee.”
After speaking with Roger, Peter went back online to the Discount website and selected a washer and dryer to buy for George. Peter filled out the online order form by typing in his name and address as the purchaser, and indicated that the appliances were to be delivered directly to George’s address.
At the bottom of the online order form, in small type, was the following statement: “Merchandise sold AS IS–No warranties. Purchaser waives all claims and assumes all risks and liabilities.’’
Discount delivered the washer and dryer to George’s home. The first time George used the washer, it leaked water and caused serious damage to George’s wood floor.
George immediately called an appliance repair shop and a service specialist was sent to look at the washer. After inspecting the appliances, the service specialist informed George that both the washer and dryer
showed signs of heavy use. In particular, the washer had worn hoses and a rusted and cracked tub that was the clear cause of the water leak.
George called Peter and told him what happened. Peter called Roger and explained the situation. Roger told Peter that there was nothing Discount could do because of the written statement at the bottom of the online order form. When Peter reminded Roger about their prior telephone conversation, Roger said that he was just expressing his opinion. When Peter asked about the “30-Day Money Back Guarantee,” Roger admitted that, “Yeah, we always say that, but we don’ t really have a guarantee since our prices are so low.” Peter followed up by sending a letter to Discount demanding a refund.
As a result of the damage caused by the leak, George had to completely replace the floor in his house and missed two weeks of work overseeing the repairs.
What claims under the DTPA, if any, can George make against Discount and Roger?
Explain fully.
(b) George may assert claims against Discount and Roger under the DTPA for violation of the
laundry list,
section 17.46(b), and
breach of express warranty.
Whether George’s claims may be successfully asserted will depend upon his status as a consumer under the DTPA, and whether he can establish a legal and factual basis for the claims.
To be a consumer, the entity asserting consumer status must seek or acquire goods or services by purchase or lease. There is no requirement that the entity that acquires the goods must also pay for the goods.
To establish a laundry list claim, the consumer must show that a misrepresentation was made or there was a failure to disclose information, and that it was relied on.
To establish a breach of warranty claim under the DTPA, the consumer must show that a warranty was formed outside of the DTPA, that it was not disclaimed, and that the consumer is a proper entity to assert a claim for breach of that warranty.
A consumer may assert a claim under the DTPA against any entity that violated the Act in connection with his transaction.
In this case, George acquired a washer and dryer, purchased by Peter. Therefore, George is a consumer. It also could be argued that he was an intended beneficiary and therefore was a consumer. When Peter spoke with Roger, he was told that the appliances were “practically brand new,” had “never been used,” and had “only minor cosmetic scratches and dents.” Roger also told Peter not to worry about purchasing online because the washers and dryers were subject to an “Absolute 30-Day Money Back Guarantee.” These statements were made directly in connection with the transaction that resulted in the purchase of the washer and dryer and were statements of fact, not mere opinion or puffing. In reliance on these statements, Peter decided to purchase the products from Discount’s website. Under the DTPA, there must be reliance by a consumer to the consumer’s detriment. As discussed above, Peter was a consumer. His reliance on the statements was to the detriment of George, also a consumer.
The defendants may try to argue that the “as is” clause negated any reliance, however, that is not the effect of a simple “as is” clause that does not mention reliance. As discussed below, in connection with warranties, such clauses merely operate to negate implied warranties.
Because the products were not as represented and there was not a money back guarantee, the statements constitute an actionable misrepresentation under the laundry list. Roger made these statements individually and as an agent of Discount. George, therefore, has a claim under the laundry list for misrepresentation against both Roger individually and Discount.
Additionally, the Discount website stated, “All merchandise in LIKE NEW condition” and “Customer Satisfaction Guaranteed!” These statements appear to have been made as statements of fact and were false. Although “like new” could be considered puffing, and thus, not actionable, “satisfaction guaranteed” would lead a consumer to believe that the product could be returned if it was not acceptable, which in fact was false. Because Peter relied on this statement to George’s detriment, this statement could give rise to a claim under the laundry list.
George, unlike Peter, does not have a claim against Roger based on unconscionability.
George did not deal directly with Roger or Discount, and, therefore, their actions could not have taken advantage of his lack of knowledge or experience.
George may also have a claim based on breach of warranty.
Although there generally are no implied warranties in the sale of used goods, Roger’s statement, “Absolute 30-Day Money Back Guarantee,” made on behalf of the seller, Discount, appears to be a factual promise regarding the goods. Because this statement was relied on by Peter and became a basis of the bargain, under the DTPA it could constitute an express warranty of the seller.
As noted above, any breach of warranty is actionable by a consumer under the DTPA and may be asserted against the seller, Discount.
Although George was not in privity with Discount, many Texas courts have held that privity is not required to assert a claim for breach of express warranty.
Finally, Discount’s website stated, “Merchandise sold AS IS—No warranties. Purchaser waives all claims and assumes all risks and liabilities.”
Warranties asserted under the DTPA are subject to limitations and disclaimers generally applicable outside of the DTPA. Under the UCC, an “as is” clause such as this one may waive implied warranties, but does not disclaim express warranties.
Because the warranty at issue is an express warranty, the “as is” clause has no effect.
Additionally, although the clause states that the purchaser “waives” all claims, waivers under the DTPA generally are unenforceable and void. For a DTPA waiver to be enforceable, the waiver language must comply with the DTPA, be signed by the consumer, and the consumer must be represented by an attorney. In this case, the attempted waiver is unenforceable.
07/12 #3:
Peter searched online for a wedding gift for his son, George, and found a website for a local business called Discount Appliances (“Discount”). The website contained photos of washers and dryers for sale and included the following statements on the homepage: “All merchandise in LIKE NEW condition’’ and “customer Satisfaction Guaranteed!” The prices of the washers and dryers were listed next to the photos and were substantially less than the prices of new washers and dryers.
Peter called the telephone number listed on the website and spoke with Roger, a Discount representative. Roger explained that the washers and dryers were “ practically brand new,” had “never been used,” and had “only minor cosmetic scratches and dents.” Roger also told Peter not to worry about
purchasing online because the washers and dryers were subject to an “absolute 30-day Money Back Guarantee.”
After speaking with Roger, Peter went back online to the Discount website and selected a washer and dryer to buy for George. Peter filled out the online order form by typing in his name and address as the purchaser, and indicated that the appliances were to be delivered directly to George’s address.
At the bottom of the online order form, in small type, was the following statement: “Merchandise sold AS IS–No warranties. Purchaser waives all claims and assumes all risks and liabilities.’’
Discount delivered the washer and dryer to George’s home. The first time George used the washer, it leaked water and caused serious damage to George’s wood floor.
George immediately called an appliance repair shop and a service specialist was sent to look at the washer. After inspecting the appliances, the service specialist informed George that both the washer and dryer
showed signs of heavy use. In particular, the washer had worn hoses and a rusted and cracked tub that was the clear cause of the water leak.
George called Peter and told him what happened. Peter called Roger and explained the situation. Roger told Peter that there was nothing Discount could do because of the written statement at the bottom of the online order form. When Peter reminded Roger about their prior telephone conversation, Roger said that he was just expressing his opinion. When Peter asked about the “30-Day Money Back Guarantee,” Roger admitted that, “Yeah, we always say that, but we don’ t really have a guarantee since our prices are so low.” Peter followed up by sending a letter to Discount demanding a refund.
As a result of the damage caused by the leak, George had to completely replace the floor in his house and missed two weeks of work overseeing the repairs.
Under the DTPA, what elements of damages, if any, can Peter recover against Discount? Explain fully.
(c) If Peter prevails against Discount under the DTPA, he may recover economic damages. If he shows that Discount acted knowingly, he may recover economic damages up to a total of three times the amount of economic loss. Or, if Peter shows that Discount acted intentionally, he may recover economic damages, damages for mental anguish, as well as up to a total of three times economic damages and mental anguish damages. Under the DTPA, Peter may also recover reasonable and necessary attorneys’ fees, and in an appropriate case, any other relief the court deems appropriate (i.e., injunctive relief, which does not seem applicable in this case).
The issue in this case is whether Peter suffered any loss compensable under the DTPA.
Economic loss is defined as all pecuniary loss.
The question is whether Peter, who purchased the washer and dryer for George, suffered any pecuniary loss.
It could be argued that because Peter never took possession of the machines and never used them, he has no pecuniary loss. He paid for an item and it was delivered. On the other hand, Peter has a contract with Discount and is a consumer under the DTPA. He was misled and deceived into purchasing the product that was not as represented. Peter, therefore, should be entitled to recover for his economic loss.
Under this standard, Peter could seek to recover a refund of the price he paid for the machines or the difference in value between what he received and what he was promised, the additional cost of repairs to the machines, or the cost to purchase replacements.
If Peter shows that Discount acted knowingly (i.e., that it knew or should have known that its statement or conduct was false, deceptive, or misleading), the jury may award an amount up to a total of three times Peter’s economic loss.
In this case, Roger admits that he made the representation knowing that it was false.
Additionally, upon a showing of knowingly, the jury is authorized to award Peter damages for mental anguish. To recover damages for mental anguish, it is necessary to show a high degree of mental pain or distress. Generally, this requires direct evidence of the nature, severity, and duration of the mental anguish, and that it caused a substantial disruption of the claimant’s daily routine. It does not appear that Peter has suffered any compensable mental anguish, but he may be entitled to additional damages based on his economic loss.
If Peter is able to establish that Discount acted intentionally (which is essentially defined as knowingly plus the specific intent that the consumer act in reliance on the falsity or deception), Peter would be entitled to recover his economic and mental anguish damages, as well as up to three times both economic and mental anguish damages.
Finally, in the event Peter prevails, the court must award reasonable and necessary attorneys’ fees. Attorneys’ fees under the DTPA must be awarded in a dollar amount, based on the nature and amount of work performed.
07/12 #3:
Peter searched online for a wedding gift for his son, George, and found a website for a local business called Discount Appliances (“Discount”). The website contained photos of washers and dryers for sale and included the following statements on the homepage: “All merchandise in LIKE NEW condition’’ and “customer Satisfaction Guaranteed!” The prices of the washers and dryers were listed next to the photos and were substantially less than the prices of new washers and dryers.
Peter called the telephone number listed on the website and spoke with Roger, a Discount representative. Roger explained that the washers and dryers were “ practically brand new,” had “never been used,” and had “only minor cosmetic scratches and dents.” Roger also told Peter not to worry about
purchasing online because the washers and dryers were subject to an “absolute 30-day Money Back Guarantee.”
After speaking with Roger, Peter went back online to the Discount website and selected a washer and dryer to buy for George. Peter filled out the online order form by typing in his name and address as the purchaser, and indicated that the appliances were to be delivered directly to George’s address.
At the bottom of the online order form, in small type, was the following statement: “Merchandise sold AS IS–No warranties. Purchaser waives all claims and assumes all risks and liabilities.’’
Discount delivered the washer and dryer to George’s home. The first time George used the washer, it leaked water and caused serious damage to George’s wood floor.
George immediately called an appliance repair shop and a service specialist was sent to look at the washer. After inspecting the appliances, the service specialist informed George that both the washer and dryer
showed signs of heavy use. In particular, the washer had worn hoses and a rusted and cracked tub that was the clear cause of the water leak.
George called Peter and told him what happened. Peter called Roger and explained the situation. Roger told Peter that there was nothing Discount could do because of the written statement at the bottom of the online order form. When Peter reminded Roger about their prior telephone conversation, Roger said that he was just expressing his opinion. When Peter asked about the “30-Day Money Back Guarantee,” Roger admitted that, “Yeah, we always say that, but we don’ t really have a guarantee since our prices are so low.” Peter followed up by sending a letter to Discount demanding a refund.
As a result of the damage caused by the leak, George had to completely replace the floor in his house and missed two weeks of work overseeing the repairs.
Under the DTPA, what elements of damages, if any, can George recover against Discount? Explain fully.
(d) If George prevails against Discount under the DTPA, he may recover his economic damages. If he shows that Discount acted knowingly, he may recover economic damages up to a total of three times his economic loss. Or, if George shows that Discount acted intentionally, he may recover economic damages, damages for mental anguish, as well as up to a total of three times economic damages and mental anguish damages. Under the DTPA, George may also recover reasonable and necessary attorneys’ fees, and in an appropriate case any other relief the court deems appropriate.
The issue in this case is whether the damages George suffered are compensable under the DTPA.
Economic loss is defined as all pecuniary loss.
As discussed above, George is a consumer under the DTPA and may recover all economic damages produced by the defendant’s wrongful conduct. George’s direct economic damages include the cost of repairs to the washer and dryer, the cost of obtaining a washer and dryer as represented, or the return of the purchase price. George also is entitled to the consequential economic loss he suffered, including the cost to repair the floor, and the wages he lost due to the two weeks he was unable to work. (Note: Only George or Peter, not both, can recover economic damages for the cost of repairing or replacing the machines.)
As discussed above, if George shows Discount acted knowingly (i.e., that it knew or should have known that its statement or conduct was false, deceptive, or misleading), the jury may award an amount up to a total of three times George’s economic loss. If George is able to establish that Discount acted intentionally (which is knowingly plus the specific intent that the consumer act in reliance on the falsity or deception), George would be entitled to recover his economic and mental anguish damages, as well as up to a total of three times both economic and mental anguish damages.
Finally, in the event George prevails, the court must award reasonable and necessary attorney’s fees. Attorneys’ fees under the DTPA must be awarded in a dollar amount, based on the nature and amount of work performed.
02/12 #7:
Albert retained Brenda, a licensed, professional real estate agent, to list his house in Bexar County, Texas, for sale. As part of her initial inspection of the property, Brenda measured the house’s square footage. She inadvertently calculated the square footage of the house as 3,000 sq. ft. when, in fact, the square footage was 2,500 sq. ft. Albert noticed the error in Brenda’s calculation but did not correct it. With Albert’s
approval, Brenda listed the house for sale as having 3,000 square feet and with a sales price of $250,000.
Cedric was shopping for a house and hired Brenda as his agent. Brenda arranged for Cedric to view Albert’s house. During the viewing, Cedric told Brenda that the listing had interested him because of the house’s location and size. While there, Cedric noticed that the floors appeared to be slightly warped and also saw cracks around some of the doors and windows. He asked Brenda if she thought the house had any foundation damage. Brenda told him that, in her opinion, the cracks appeared to be cosmetic and would likely have no effect on the house’s value. Based on Brenda’s statements, as well as the information he read in Brenda’s listing, Cedric purchased the house for $250,000.
Six months later, Cedric’s employer required him to move to Atlanta. Cedric contacted Edward, a real estate agent, to list the house for sale. Before listing the house, Edward reviewed Brenda’s listing from the previous year. After inspecting the house, Edward advised Cedric that the square footage in Brenda’s listing was wrong and that the house was actually only 2,500 sq. ft. Edward hired a licensed inspector to inspect the
house, and the inspector discovered the house’s foundation was significantly damaged, and the damage would negatively affect the house’s value.
Edward advised Cedric that, due to the size of the house and the damage to the foundation, the house’s value was only $190,000. Cedric was very upset at this news and became so stressed about the house’s decreased value that he developed a painful ulcer, which required him to undergo treatment by a physician.
What claims, if any, may Cedric assert against Albert and Brenda under Texas consumer laws? Explain fully.
(a) Cedric may assert claims for misrepresentation against Brenda and failure to disclose against Albert under the Texas Deceptive Trade Practices Act (“DTPA”).
The viability of his claims depends on whether the statements were factual or opinion, Albert’s intent, and whether Brenda was performing a professional service that is exempt from the DTPA.
Under the DTPA, a person who makes a misrepresentation that a consumer relies on or who fails to disclose material information with the intent to induce the consumer into the transaction may be liable for any damages produced by that misrepresentation. To be actionable, the consumer must rely on the representation or failure to disclose.
Under the DTPA, Cedric may sue any entity whose false, deceptive, or misleading conduct occurred in connection with the transaction. Because both Brenda and Albert dealt directly with Cedric, they are proper parties and may be sued under the DTPA. Even though Brenda was acting as an agent for Albert, she still may be individually responsible under the DTPA for her misrepresentations. There is no requirement of privity. An issue arises, however, regarding whether Brenda’s conduct constitutes a professional service exempt from the DTPA.
Section 17.49(c) of the DTPA provides that it does not apply to a claim for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill. It may be argued that the service of a professional real estate agent is in fact an exempt “professional service” under the DTPA, the essence of which is advice, judgment, opinion, or similar professional skill. The inquiry, however, does not end there. Section 17.49(c) also provides that its exemption does not apply to an express misrepresentation of a material fact that cannot be characterized as advice, judgment, or opinion. In the instant case, the statement that forms the basis of Cedric’s misrepresentation claim is Brenda’s statement that the house contains 3,000 square feet. This is not a matter of opinion, but rather a representation of fact, for which Brenda may be responsible under the DTPA. On the other hand, Brenda’s statement regarding the foundation cracks may be exempt from the DTPA. Brenda told Cedric that, “in her opinion,” the cracks appeared to be cosmetic and likely would have no effect on the house’s value. These statements were not made as material representations, and may be characterized as advice, judgment, or opinion. If Brenda’s services were found to be professional within the definition of section 17.49(c), the statements regarding the foundation would not be actionable.
To establish a violation of the laundry list, Cedric must show that there was either an actionable misrepresentation or failure to disclose, and that he relied upon it to his detriment. The most common way of establishing a violation of the DTPA is to show a misrepresentation of the characteristics, ingredients, uses, benefits, or quantities of a good or service.
Goods are defined by the DTPA to mean tangible chattels or real property purchased or leased for use.
Brenda’s statement regarding the square footage of the house is a misrepresentation of the good Cedric was purchasing and was relied upon by Cedric when deciding to make the purchase at the price of $250,000. On the other hand, even assuming that Brenda’s statement regarding the foundation is not exempt under the professional service exemption, it probably is not actionable. Brenda’s statement probably is nothing more than mere opinion or puffing, and not actionable under the laundry list.
Cedric also may have a claim against Albert under the failure to disclose provision of the laundry list.
Under the DTPA, a seller who fails to disclose information with an intent to induce a consumer into a transaction that the consumer otherwise would not enter into violates the laundry list.
In this case, Albert knew about the error in the square footage designation and took no steps to correct it or disclose the true facts to Cedric. It can be assumed that Albert knew that this information would make a difference to Cedric, and Albert’s failure to make the disclosure was intended to induce Cedric into the transaction. Albert, as principal, also may be responsible for the misrepresentations of his agent, Brenda, under general principles of agency law.
02/12 #7:
Albert retained Brenda, a licensed, professional real estate agent, to list his house in Bexar County, Texas, for sale. As part of her initial inspection of the property, Brenda measured the house’s square footage. She inadvertently calculated the square footage of the house as 3,000 sq. ft. when, in fact, the square footage was 2,500 sq. ft. Albert noticed the error in Brenda’s calculation but did not correct it. With Albert’s
approval, Brenda listed the house for sale as having 3,000 square feet and with a sales price of $250,000.
Cedric was shopping for a house and hired Brenda as his agent. Brenda arranged for Cedric to view Albert’s house. During the viewing, Cedric told Brenda that the listing had interested him because of the house’s location and size. While there, Cedric noticed that the floors appeared to be slightly warped and also saw cracks around some of the doors and windows. He asked Brenda if she thought the house had any foundation damage. Brenda told him that, in her opinion, the cracks appeared to be cosmetic and would likely have no effect on the house’s value. Based on Brenda’s statements, as well as the information he read in Brenda’s listing, Cedric purchased the house for $250,000.
Six months later, Cedric’s employer required him to move to Atlanta. Cedric contacted Edward, a real estate agent, to list the house for sale. Before listing the house, Edward reviewed Brenda’s listing from the previous year. After inspecting the house, Edward advised Cedric that the square footage in Brenda’s listing was wrong and that the house was actually only 2,500 sq. ft. Edward hired a licensed inspector to inspect the
house, and the inspector discovered the house’s foundation was significantly damaged, and the damage would negatively affect the house’s value.
Edward advised Cedric that, due to the size of the house and the damage to the foundation, the house’s value was only $190,000. Cedric was very upset at this news and became so stressed about the house’s decreased value that he developed a painful ulcer, which required him to undergo treatment by a physician.
What remedies, if any, are available to Cedric against Albert and Brenda under Texas consumer laws? Explain fully.
(b) If Cedric prevails against Albert and/or Brenda, under the DTPA he will be able to recover his economic damages and reasonable and necessary attorneys’ fees.
If he can show either party acted knowingly, he can recover damages for mental anguish as well as up to three times his economic damages against that party. Or, if he can show either party acted intentionally, he may recover up to three times both his economic and mental damages against that party. To recover any damages, he must show the false, deceptive, or misleading act was a producing cause of his damages.
Assuming Cedric prevails against Brenda based on her misrepresentations regarding the square footage of the house, or Albert for his failure to disclose the proper square footage, Cedric can recover the difference in value between the house as represented and its true value. If Cedric recovers against Brenda for her misrepresentations regarding the foundation, he would be able to recover either the difference in value between the value of the house with the defective foundation and the amount he paid, or the cost of repairs. Cedric also may recover for the additional economic damages he suffered as a result of the misrepresentations, specifically any costs of medical treatment or lost wages resulting from his ulcer.
Finally, if Cedric can show that Brenda or Albert acted knowingly (i.e., that they knew or should have known their conduct was false, deceptive, or misleading), he can recover damages for mental anguish.
With respect to Albert, acting knowingly will be easy to prove due to the intent requirement imposed by the DTPA’s “failure to disclose” provision. Assuming Cedric establishes either or both acted knowingly, to recover damages for mental anguish he must show a high degree of mental pain. It is unclear whether being “very upset” will be sufficient. He also must show a physical manifestation or a substantial disruption in his daily routine. If he can prove the ulcer was produced by the misrepresentations, he should be able to meet this standard.
The amount of damages Cedric is entitled to also will be affected by his percentage of responsibility.
Under Texas’s Proportionate Responsibility Act, the jury will allocate responsibility between all defendants and Cedric.
Based on the facts, Cedric may be found responsible for some of the damage caused by the damaged foundation. Cedric was aware of the warped floors and cracked doors and may be found to have acted in a way that could lead a jury to find he was responsible for some of his damages.
Cedric also may be entitled to additional or punitive damages under the DTPA.
If Cedric can prove that Brenda or Albert acted knowingly, he is entitled to up to three times his economic damages against that defendant. If Cedric can prove that Brenda or Albert acted intentionally, he is entitled to up to three times his economic and mental anguish damages against that defendant.
Finally, if Cedric prevails, the court will award reasonable and necessary attorneys’ fees. The fees should be based on an hourly rate for the amount of work performed, and not a percentage of the recovery.
07/11 #6:
Leonard leased the apartment over his garage to Terry. Because he was concerned about crime in the neighborhood, Leonard contacted Quality Security Systems (“Quality”) to look into a security system for Terry’s apartment. Quality’s salesperson, Chester, told Leonard that Quality’s system: was the best and most reliable system available on the market; would be installed and tested by experienced, licensed, and bonded security specialists; and had been awarded the highest rating by the Security Specialists Association of America (SSAA).
Persuaded by Chester’s sales pitch, Leonard agreed to purchase a security system from Quality for Terry’s apartment. Attached to the contract of sale was a form entitled “Waiver of Consumer Rights.” It was printed in large, bold print. The form stated that, by signing the contract, the purchaser waived all consumer rights under the Texas Deceptive Trade Practices Act (DTPA). Leonard signed the contract and the waiver form. An employee of Quality installed a security system in Terry’s apartment.
Two months later, on January 10, 2010, Terry’s apartment was burglarized and all of her valuables were stolen. At the time of the burglary, the security system’s alarm did not sound. On February 10,2010, without giving prior notice to Quality, Terry filed suit against Quality alleging violations of the DTPA. Quality filed its answer to Terry’s complaint on March 10,2010. As affirmative defenses, Quality asserted that: (1) Terry was not a “consumer” as defined in the DTPA and therefore had no standing to sue; and (2)
Terry’s suit was barred by the waiver in the form signed by Leonard.
At trial, Quality moved the court for the first time to dismiss Terry’s suit on the ground that Terry had failed to give Quality timely and proper notice of her claim as required by the DTP A. The court denied the motion to dismiss.
The evidence introduced at trial showed that the Quality employee who installed the security system was neither licensed nor bonded, had never installed a security system, had not properly connected the alarm, and never tested it. The evidence further showed that Quality’s system had been rated “inferior” and stripped of its SSAA rating two years before Leonard signed the contract.
Should Quality prevail on its affirmative defense that Terry is not a consumer? Explain fully.
(a) Quality should not prevail on its defense that Terry is not a consumer.
The issue is who qualifies as a “consumer” for purposes of the Deceptive Trade Practices Act (“DTPA”).
Under the DTPA, a consumer is an entity that seeks or acquires, by purchase or lease, goods or services. In this case, the alarm system is clearly a good, and any maintenance or monitoring would be considered a service.
According to the facts, Quality installed a security system in Terry’s apartment that was contracted and paid for by Leonard.
A person may be a consumer provided she acquires goods by a purchase; there is no requirement that the consumer actually be the one who pays or that the consumer be in privity with the party who supplies the goods or services.
While Quality could argue that Terry is not a consumer because she did not acquire the security system, which was at all times owned by Leonard, the courts have held that it is not necessary that the consumer be the owner of the goods to “acquire” them for purposes of the DTPA.
As Leonard’s tenant, Terry was an intended beneficiary of Leonard’s purchase. Therefore, Terry was a consumer for purposes of the DTPA.
07/11 #6:
Leonard leased the apartment over his garage to Terry. Because he was concerned about crime in the neighborhood, Leonard contacted Quality Security Systems (“Quality”) to look into a security system for Terry’s apartment. Quality’s salesperson, Chester, told Leonard that Quality’s system: was the best and most reliable system available on the market; would be installed and tested by experienced, licensed, and bonded security specialists; and had been awarded the highest rating by the Security Specialists Association of America (SSAA).
Persuaded by Chester’s sales pitch, Leonard agreed to purchase a security system from Quality for Terry’s apartment. Attached to the contract of sale was a form entitled “Waiver of Consumer Rights.” It was printed in large, bold print. The form stated that, by signing the contract, the purchaser waived all consumer rights under the Texas Deceptive Trade Practices Act (DTPA). Leonard signed the contract and the waiver form. An employee of Quality installed a security system in Terry’s apartment.
Two months later, on January 10, 2010, Terry’s apartment was burglarized and all of her valuables were stolen. At the time of the burglary, the security system’s alarm did not sound. On February 10,2010, without giving prior notice to Quality, Terry filed suit against Quality alleging violations of the DTPA. Quality filed its answer to Terry’s complaint on March 10,2010. As affirmative defenses, Quality asserted that: (1) Terry was not a “consumer” as defined in the DTPA and therefore had no standing to sue; and (2)
Terry’s suit was barred by the waiver in the form signed by Leonard.
At trial, Quality moved the court for the first time to dismiss Terry’s suit on the ground that Terry had failed to give Quality timely and proper notice of her claim as required by the DTP A. The court denied the motion to dismiss.
The evidence introduced at trial showed that the Quality employee who installed the security system was neither licensed nor bonded, had never installed a security system, had not properly connected the alarm, and never tested it. The evidence further showed that Quality’s system had been rated “inferior” and stripped of its SSAA rating two years before Leonard signed the contract.
Should Quality prevail on its affirmative defense that Terry’s suit is barred by the waiver signed by Leonard? Explain fully.
(b) Quality should not prevail on its claim that Terry’s suit is barred by the waiver she signed.
The issue is what constitutes a valid waiver of rights under the DTPA.
As part of the purchase of the security system, Leonard signed a purported waiver of the DTPA. As a general rule, the Act may not be waived and waivers are void and unenforceable. To be enforceable, the waiver must be signed by the consumer and the consumer must be represented by an attorney.
First, the facts indicate that Leonard, not Terry, signed the waiver.
Second, there is nothing in the facts to indicate that Leonard or Terry was represented by an attorney. Even if the waiver was valid as to Leonard, it should not be effective to waive Terry’s rights under the DTPA because Terry did not sign it.
Therefore, the waiver is not enforceable.
