Florida’s Seldom Used 3-Day Right of Rescission

If you are a roofer, you are likely no stranger to the concept of providing materials and services over the course of several days; however, you are much less likely familiar with the custom of providing clients notice of a 3-day right of rescission. Chances are that you have never heard of it before… but it has more implications for your livelihood as a business owner than you may think. Anyone who contracts to provide future consumer services is theoretically subject to Florida Administrative Code 2-18.002, which states in part that it is an “unfair or deceptive act or practice for the seller of future consumer services to fail to furnish the buyer” with a contract containing the following statements: “You may cancel this contract without any penalty or obligation within 3 business days…and receive a full refund of all payments made to the seller.”

Florida Administrative Code 2-18.002 was enacted in 1996, and is one of two administrative rules regulating unfair and deceptive trade practices. To be sure, 2-18.002 is not a statute mandated from the Florida legislature; rather, it is a provision enacted by the Department of Legal Affairs, an agency. When enacting rules, agencies must act within the confines of any delegated legislative authority. The agency must be granted rule making authority and then only adopt rules that implement or interpret specific powers and duties granted by the enabling statute. State, Dep’t. of Fin. Servs. v. Peter Brown Construction, 108 So. 3d 723, 726 (Fla. 1st DCA 2013). If any agency exceeds such authority, the rule would be unenforceable as an invalid exercise of delegated legislative authority.

There are no appellate decisions providing guidance as to the enforceability of 2-18.002.  Arguably, 2-18.002 is an invalid exercise of delegated legislative authority, and necessarily unenforceable. Under Fla. Stat. § 120.52(8), “[s]tatutory language shall be construed to extend no further than implementing or interpreting the specific powers and duties conferred by the enabling statute.” 2-18.002 is purportedly a legitimate grant of authority under Fla. Stat. § 501.205, which states:

The department may adopt rules which set forth with specificity acts or practices that violate this part and which prescribe procedural rules for the administration of this part. All rules and administrative actions taken by the department shall be pursuant to chapter 120.

While Fla. Stat. § 501.205 may appear to confer broad authority on the Department of Legal Affairs, it does not expressly require that contracts for future consumer services include a 3-day right of rescission. In order for 2-18.002 to be enforceable, it must extend no further than the particular powers and duties conferred by Fla. Stat. § 501.205. Fla. Stat. § 120.52(8); Dep’t of Business and Professional Regulation v. Calder Race Course, 724 So. 2d 100, 104 (Fla. 1st DCA 1998). In Florida Department of Highway Safety and Motor Vehicles v. J.M. Auto, Inc., the First District Court of Appeal declined to find that a statutory provision granting the Department of Highway Safety and Motor Vehicles (“the Department”) broad authority to “administer and enforce the provisions of this chapter” necessarily enabled the Department “to enact a rule deeming certain conduct to be the unauthorized establishment of additional or supplemental motor vehicle dealerships.” 977 So. 2d 733, 735 (Fla. 1st DCA 2008).

Similarly, Fla. Stat. § 501.205 merely prohibits acts in the conduct of trade or commerce that are actually unfair, unconscionable, and deceptive. While the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) does not define what an unfair or deceptive act is, great weight is given to the definition contained within the statute’s federal counterpart, which describes an unfair practice as one that “offends established public policy” and is “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Samuels v. King Motor Co., 782 So. 2d 489, 499 (Fla. 4th DCA 2001).

There is little guidance as to which industries the Attorney General believes are subject to the 3-day right of rescission. However, the Attorney General has broad authority to seek enjoinment of the allegedly unfair act where it sees fit. Does 2-18.002 apply to the sale of future construction services on a continuing basis, the sale of future medical services on a continuing basis (like dialysis), the sale of future photography services on a continuing basis, the sale of future landscape services on a continuing basis, the sale of future pool services on a continuing basis, the sale of future cable/satellite services on a continuing basis, the sale of future cell phone services on a continuing basis, the sale of an extended warranty by an automobile dealer?  Who knows?

One remedy available to industries that may be engaged in the sale of future consumer services is to seek a rule challenge pursuant to Fla. Stat. § 120.56(e). Any affected person may petition to the Division of Administrative Law Hearings. The administrative judge’s ruling on the petition is subject to judicial review by a district court of appeal.  Until this rule is challenged and subject to Appellate review we will not know whether 2-18.002 is enforceable and we will not know which industries are subjected to compliance with this rule.  Until the industries potentially affected by this rule challenge the rule, it is impossible to know whether the rule is enforceable and whether the Attorney General will assert that the failure to provide a 3-day right of rescission is a per se FDUTPA violation.  The Attorney General does bring FDUTPA claims predicated on this 3-day right of rescission.  Although it is impossible to know which industries the Attorney General targets, the Attorney General does enforce 2-18.002 in portions of the travel industry.


By: D. Brad Hughes, Esq. and Hana Eldick, J.D. Candidate

 

CATEGORY: Florida Business Litigation Blog