by Robert J. Stoney
Feb 22, 2005
The Virginia Consumer Protection Act, Va. Code Ann. § 58.2-196 et. seq., can be a potent, but awkward, tool in products liability actions in Virginia. On its face, the Act offers a potent and largely untapped path to liability in diverse contexts. The language is sweeping and comprehensive.
The Act applies to all consumer transactions in “goods and services,“ with “goods” expansively defined as “all real, personal or mixed property, tangible or intangible.” The Act’s inclusion of real estate sales appears to provide an end-run around the New Home Warranty Act.
The Act excludes landlord/tenant actions, but not those involving fraud. Thus, the Act appears to circumvent the numerous proximate cause problems in Virginia inadequate security litigation.
The Act proscribes misrepresenting that goods or services have certain quantities, characteristics, ingredients, uses, or benefits, or are of a particular standard, quality, grade, style, or model. This far broader definition of fraud is useful in situations where traditional fraud principles might not suffice.
Finally, the Act proscribes “offering for sale goods which are . . . imperfect or ‘not first class,’ without clearly and unequivocally indicating
. . . that the goods . . .are defective . . .” This proscription makes the sale of virtually any defective product a violation of the Act.
Blankingship & Keith has included a claim of violation of the Consumer Protection Act in each of the above contexts, and others, and have litigated the issue vigorously. Because its reach is overwhelmingly broad and it has yet to be untested in the Supreme Court, it should be used with caution.
The purpose of the Act is “promote fair and ethical standards of dealings between suppliers and the consuming public.” § 59.1-197. As noted above, the Act can be effectively pled in many contexts. This paper focuses on the products liability applications of the Act.
The Act proscribes a variety of misrepresentations by suppliers to consumers. A violation of the Act subjects the supplier to liability for actual damages for his misrepresentation or a fine of $500, whichever is greater.
A willful violation of the Act may subject the supplier to treble damages and attorney’s fees.
As discussed in detail below, the battleground for application of the Act has been the definition of the term “actual damages.” Typically, the defendant contends that pecuniary damages – or benefit of the bargain losses – are the consumer’s sole remedy under the Act. The plaintiff counters that the language of the Act does not limit its scope to contract damages. The Virginia Supreme Court has not resolved the issue and the circuit courts are split 2-2.
The Act in Detail
A. What is covered?
The Act governs all “consumer transactions” in Virginia, which include: “the advertisement, sale, lease or offering for sale or lease, of goods or services to be used primarily for personal, family or household purposes.” Va. Code Ann. § 59.1-198.
Each of the defined terms in the Act is drawn for maximum reach. Thus:
"Goods" means all real, personal or mixed property, tangible or intangible.
“Services" includes but shall not be limited to work (i) performed in the business or occupation of the supplier or (ii) performed for the supplier by an agent whose charges or costs for such work are transferred by the supplier to the consumer or purchaser as an element of the consumer transaction.
B. Who is regulated
With a few notable exceptions, the Act regulated all “suppliers” of goods in Virginia. § 59.1-198. A supplier includes anyone who sells, leases, advertises, solicits or engages in consumer transactions. The Act applies all the way up the supply chain, covering manufacturers and distributors who advertise, lease or sell goods to others for resale to consumers. Id.
C. Who is Exempt
Section 59.1-199 immunizes a few select groups from the Act. These favored few include:
1. Media defendants for innocent advertising misrepresentations
2. Banks and bank-like entities
3. Public service corporations
4. Mortgage lenders
6. Gas suppliers
7. Insurance companies
8. Real estate licensees
These groups appear to be except because they have good lobbyists or they are heavily regulated, or both.
The Act also excepts certain categories of consumer transactions, including:
1. Practices authorized by State or federal law or regulation. 59.1-199A
2. Practices regulated by the Federal Consumer Credit Protection Act
3. Landlord and tenant transactions, unless the landlord commits fraud
D. Proscribed Acts
Section 59.1-200 proscribes a laundry-list of “fraudulent acts or practices” by a supplier in connection with a consumer transaction. When reviewing a products liability claim under the Act, review the entire list of prohibited practices. Note, however, that the causal connection between a personal injury and the misrepresentation may be a stretch in many instances.
Many types of prohibited conduct are things that fraudulently induce a consumer to buy a good, such as bait and switch tactics, false “made in the USA labels,” and misleading affiliation claims. Even though without the misrepresentation the victim would not have purchased the defective product, proximate cause is often absent.
For products liability the misrepresentations leading to the clearest liability are:
5. Misrepresenting that goods or services have certain quantities, characteristics, ingredients, uses, or benefits;
6. Misrepresenting that goods or services are of a particular standard, quality, grade, style, or model;
7. Advertising or offering for sale goods which are used, secondhand, repossessed, defective, blemished, deteriorated, or reconditioned, or which are "seconds," irregulars, imperfects, or "not first class," without clearly and unequivocally indicating in the advertisement or offer for sale that the goods are used, secondhand, repossessed, defective, blemished, deteriorated, reconditioned, or are "seconds," irregulars, imperfects or "not first class";
10. Misrepresenting that repairs, alterations, modifications, or services have been performed or parts installed;
14. Using any other deception, fraud, false pretense, false promise, or misrepresentation in connection with a consumer transaction;
The Act incorporates by reference a number of particular consumer laws, the violations of which are also violations of the Act. These ancillary acts are also useful to review for products liability. I will frequently peruse this section of § 200, to refamiliarize myself with the various consumer protection acts that exist under Virginia law.
E. Remedies for Violation
1. Statutory Summary
In addition to administrative remedies, the Act contains an express private right of action to recover “actual damages” or $500, whichever is greater, caused by the prohibited act. § 59.1-204. This right accrues to “any person” who suffers a loss as a result of the violation, so privity is not required and the injured person need not be a consumer. Gill v. Rollins Protective Services Co., 773 F.2d 592(4th Cir. 1986). In addition, the “any person” language extends the reach of the Act to personal representatives in wrongful death claims.
The injured person may also recover attorney’s fees and costs. If the misrepresentations are willful, the jury can award up to three times actual damages.
Section 59.1-207 offers immunity to suppliers who can show that the misrepresentation occurred father up the supply chain and that the supplier was powerless to prevent it, or the misrepresentation was good faith error and the supplier had in place “procedures reasonably adopted” to avoid the misrepresentation.
Notwithstanding this good faith exception, § 207 empowers the Court to “order restitution and payment of reasonable attorney's fees and court costs to individuals aggrieved as a result of an unintentional violation” of the Act.
2. Actual Damages
The defense contention that “actual damages” does not include personal injury damages has some support in Virginia Circuit court caselaw. See Deane v. Novacre Orthotics & Prosthetics East, Inc., 50 Va. Cir. 418 (Page County, 1999) ((McGrath, J.); Devonshire v. EurAuPair International Inc., 40 Va. Cir. 149 (Fairfax Co, 1996) (Smith, J.) (exhibits 2 and 3). These courts have sidestepped the broad language of the Act, concluding simply that the legislature could not have intended the Act to apply:
[E]ven considering the remedial nature of the statute, and the fact that it should be broadly construed, this court feels that a fair reading of the Consumer Protection Act indicates that the "actual damages" allowed by it are limited to only those pecuniary, out-of-pocket losses that Plaintiff has sustained
An action for a violation of the Consumer Protection Act is not the correct avenue to recover other "personal injury" damages. These damages can be, and should be, recovered in a products liability case. Therefore, this court will not allow a Consumer Protection Act claim to be turned in to a torts claim for product liability. Therefore, Defendant's demurrer to Court four is granted in part and denied in part. Because Plaintiff has stated a valid cause of action, count four will be heard, however Plaintiff must limit his damages to only those pecuniary losses he incurred.
Two other circuits have reached the opposite result, finding nothing in the Act to restrict its scope. Lambert v. Downtown Garage Inc, 47 Va. Cir. 88 (Spotsylvania Co.) (Ledbetter, J.); Bosko v. NHP. Inc., Law No. CL99-2240 (Norfolk, 2001)(Poston, C.J.)(exhibits 4 and 5). Judge Poston expressly ruled that the Act covers wrongful death, as well as personal injury, damages. Judge Ledbetter simply applied the Act as written:
The Act allows any person "who suffers loss as the result of a violation" to "initiate an action to recover actual damages...." Virginia Code § 59.1-204. Nowhere in the Act is "loss" limited to property interests, and the defendants cite no authority for such a limitation.
A survey of consumer protection statutes from across the Country support Judge Ledbetter’s analysis and can be employed to convince the Court to extend the scope of the Act to personal injury cases. Some of these statutes expressly limit recovery to “loss of money or property” or “business losses.” Other statutes contain no such express restriction. In states who’s acts are expressly restricted, the courts tend to exclude personal injury claims. In states with broad or undefined measure of recovery, the courts allow personal injury damages.
Minnesota’s Consumer Protection Act, for example, allows “individuals injured . . (to) have a private cause of action to recover damages, together with costs and disbursements, including the costs of investigation and reasonable attorney's fees." Minn. Stat. § 8.31, subd. 3a. The Courts have interpreted this statute to encompass personal injury damages. Kociemba v. G.D. Searle & Co., 680 F. Supp. 1293 (D. Minn. 1988) (applying the act to products liability case. “Defendant can point to no language -- in the statute, its legislative history, or subsequent case law -- that supports the narrow reading they urge.”).
Texas’s Consumer Protection Act contains identical “actual damages” language as Virginia’s. See Tex. Code Ann. § 17.50(an aggrieved consumer in entitled to “three times the amount of actual damages plus court costs and attorneys' fees . .”). Courts in Texas have uniformly interpreted this language to encompass personal injury damages. See, e.g.,, Litton Industrial Products, Inc. v. Gammage, 644 S.W.2d 170, rev’d on other grounds, 668 S.W.2d 319 (Tex. 1984); see also Dow v. Baxter Healthcare Corp., 899 F. Supp. 822 (D. Mass 1995) (recovery under Mass. Consumer Protection Act for bodily injury not preempted).
On the other hand, courts that have rejected claims for personal injuries under their states’ consumer protection acts have done so because their acts expressly exclude those types of damages. See, e.g, Stevens v. Hyde Athletic Indust., 773 P.2d 871, 872-73 (Wash. App. 1989)(recovery limited to person who is “injured in his or her business or property”); Jones v. Portelli, 399 A.2d 1047 (N.J. Sup. 1979) (“Any person who suffers any ascertainable loss of moneys or property” may recover under the New Jersey Act).
3. Good Faith Exception to Liability
This exception has not been interpreted by the courts and is not a model of clarity. In the first sentence, it seems to exonerate suppliers who can show that they did not act negligently. The second sentence, however, authorizes the court to order restitution and attorney's fees for an unintentional violation. A few observations about this section:
i. It could be argued that the statute is attempting to distinguish between non-negligent unintentional acts and negligent unintentional acts and provide relief for the latter, but not the former. But the section clearly gives the Court discretion to award damages and fees for all unintentional acts, without drawing the distinction.
ii. This section gives the authority to make this award to the Court, while it is the “trier of fact” who decides how much to award for a willful violation. Perhaps the statute is supposed to operate as follows:
* the jury can award actual damages for negligent, but unintentional misrepresentations
* the jury can award up to 3x actual damages for intentional misrepresentations
* the jury cannot award anything for non-negligent unintentional misrepresentations, but the Court can.
iii. In any event, this section gives the Court broad discretion to make an award even when the supplier can show it was not a bad actor.
iv. Finally § 59.1-207B contains a potentially potent argument for restricting damages to pecuniary losses. The intent of the section appears to be to allow the Court to award the types of damages allowed under 204 (with no potential for trebling) for non-negligent misrepresentations. But 207 speaks in terms of restitution and fees. Restitution does not traditionally include personal injury damages. If the general assembly intended restitution and actual damages to be synonymous, then “actual damages” do not include personal injuries.
I have never had to argue that “restitution” means something other than “actual damages” simply because no defendant has made the argument. The fact that different terms are used, however, may be evidence that the general assembly intended them to encompass different types of damages.
4. Standard Torts Defenses
The Act contains no open and obvious or contributory negligence defenses. No court has yet addressed any plaintiff’s-fault defenses to liability. It is an open question whether the Supreme Court will follow Judge Ledbetter’s observation that “a claim asserted under the Act will sound remarkably similar to a common law fraud claim.”
The statute of limitations to bring a claim under the Act is two years. § 59.1-204.1. All tolling and other quirks of Virginia SOL law apply to the Act. In addition, any private right of action is tolled during the pendancy of any administrative process.