What Conduct has Been Prevented Under FDUTPA? Exploring the Factual Boundaries of Successful FDUPTA Claims
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AN OVERVIEW OF FLORIDA’S DECEPTIVE AND UNFAIR TRADE PRACTICES ACT
Part two of a three-part series
The first article in this continuing series on Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) examined the purpose of FUDTPA, who the act seeks to protect, why the act is needed, and what is actionable conduct under the act. This article addresses the specific conduct that has been prevented under FDUTPA and the factual boundaries of successful FDUTPA claims. FDUTPA was designed to encompass a broad spectrum of deceptive and unfair conduct. Claims under the act range from the deceptive placement of a GPS device on an automobile, false and misleading advertisements, and even a law school’s presentation of its post-graduation employment statistics.
Cause of Action Under FDUTPA:
An unfair action under FDUTPA generally causes injury to consumers, which is a big public policy concern in a capitalist society. Therefore, in order to bring a claim under FDUTPA three elements must be met: “(1) a deceptive act or unfair practice; (2) causation; and (3) actual damages.” Rollins, Inc. v. Butland, 951 So. 2d 860, 869 (Fla. 2d DCA 2006). For the purposes of Part II, this post will focus on examining the first element of the Rollins standard: deceptive acts and unfair practices.
Deceptive Acts Under FDUTPA:
While FDUTPA does not define “deception,” Florida’s federal and state courts have adopted the Federal Trade Commission (FTC)’s standard for deception. See Zlotnick v. Premier Sales Grp., Inc., 480 F.3d 1281, 1284 (11th Cir. 2007) (quoting PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So. 2d 773, 777 (Fla. 2003)) (adopting a similar standard to the FTC).
The FTC defines “deception” as any material “representation, omission, or practice [that] misleads or is likely to mislead” a consumer acting “reasonable under the circumstances.” See Federal Trade Commission Act Manual, 1. Thus, the standard for deceptive acts is a reasonable one. That is, would a reasonable consumer be misled? Additionally, Florida courts require the deceptive act be “probable, not possible” to mislead a reasonable consumer. See Zlotnick, 480 F.3d at 1284 (Millennium Commc’ns & Fulfillment, Inc. v. Office of the Att’y Gen., 761 So. 2d 1256, 1263 (Fla. Dist. Ct. App. 2000)). However, despite these standards, identifying a deceptive act can be difficult in the abstract. Thus, it may be more helpful to first identify the factual boundaries of successful claims for deceptive acts.
It may be a deceptive act under FDUPTA to make a claim in an advertisement without having a reasonable factual basis to make the claim. For example, in Smith v. WM. Wrigley Jr. Co., a chewing-gum company advertised that its gum was “scientifically proven to help kill the germs that cause bad breath.” 663 F. Supp. 2d 1336, 1337. However, the plaintiffs argued this was a deceptive act because the company lacked scientific proof to support the claim and charged a premium for the product based on the unsupported claim. Id. As a result, the court found this to be a deceptive act and upheld the FDUTPA claim. Id. at 1338.
Therefore, advertisers must be sure they have a reasonable basis for the claims contained in its advertisements before they are published. To determine if an advertiser had a reasonable basis, courts consider the specificity of the claim, the nature of the product, the consequences if the claim is false, the possibility of consumer reliance, and consumers’ accessibility of substantiation data. Additionally, courts have held that the omission of material facts in advertisements may constitute a deceptive act if the facts are necessary to establish the truthfulness of the claim. See, e.g., Simeon Mgmt.Corp. v. FTC, 579 F.2d 1137, 1145-46 (9th Cir. 1978). Thus, advertisers must be sure to not only paint an accurate picture, but a full picture.
A salesperson’s express, noncontractual representations may be an actionable deceptive act. See, e.g., Suris v. Gilmore Liquidating, 651 So. 2d 1282, 1283 (remanding for jury determination of a FDUTPA claim because a car dealer sold a vehicle for almost five thousand dollars more than the market rate after false claims that the vehicle was a limited-edition model). Thus, while mere puffery is not actionable, false claims of a good’s or service’s unique properties that are not superior to similar goods and services may be deceptive and, thus, actionable under FDUTPA.
Similarly, door-to-door sales pitches may constitute deceptive acts. Indeed, because consumers may be particularly vulnerable to deceptive acts from traveling salespersons who enter their home, consumers may rescind any transaction with a door-to-door salesperson during a three-day cooling-off period. See Fla. Stat. § 501.025 (2016).
Bait and Switches
It may be a deceptive practice under FDUPTA to induce consumers with an attractive deal for goods or services that the seller has no intention to sell but by which the seller has an opportunity to switch to a more expensive good or service. For example, in Department of Legal Affairs v. Father & Son Moving & Storage, the defendant provided low estimates to customers and then added additional charges at the time of delivery and payment. 643 So. 2d 22, 22-23 (Fla. 4th DCA 1994). The court noted that such a practice may be deceptive under FDUPTA because the customers were forced to pay the higher price or risk not having their personal belongings returned to them. Id. at 25.
Further, Florida courts have expanded this to include real estate transactions. In Fendrich v. RBF, a case dealing with a misleading reservation agreement to purchase a specific lot, the court held that, “when the reservation form . . . unequivocally represents that the consumer will be given the opportunity to purchase a particular lot or unit at a firm price, it can be likely to mislead.” Fendrich v. RBF, L.L.C., 842 So. 2d 1076, 1080 (Fla. 4th DCA 2003).
Breach of Contract
While a breach of contract claim may be converted into a FDUPTA claim, the conduct underlying the breach must constitute an unfair or deceptive trade act or practice, regardless of the express terms of the agreement. See, e.g., Rebman v. Follett Higher Educ. Grp., 575 F. Supp. 2d 1272, 1278-79 (M.D. Fla. 2008). Indeed, “[t]o hold otherwise would allow every failed breach of contract claim to morph into a . . . FDUTPA claim.” Bankers Trust Co. v. Basciano, 960 So. 2d 773, 778 (Fla. 5th DCA 2007).
Therefore, parties may not “convert every breach of contract or breach of lease case into a claim under the Act” without proof that the breach itself was an unfair or deceptive act. PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So. 2d 773, 777 n.2 (Fla. 2003). For example, in Kenneth F. Hackett & Assocs. v. GE Capital Info. Tech. Solutions, Inc., a finance company used a default provision as leverage to increase the debtor’s lease payments. 744 F. Supp. 2d 1305, 1307 (S.D. Fla. 2010). If the debtor did not pay the increased rate, the finance company was free to repossess the debtor’s equipment, or breach the contract and require the debtor pay the entire obligation due. Id. The court held this price increase scheme constituted more than “mere breach.” Id. at 1313.
Unfair Practices Under FDUPTA
Traditionally, Florida courts define an “unfair practice” as “one that offends established public policy and one that is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So. 2d at 777. However, this definition of “unfair practice” is not the one adopted by the FTC, and has been criticized by Florida courts as outdated. See Porsche Cars N. Am., Inc. v. Diamond, 140 So. 3d 1090, 1096 (Fla. Dist. Ct. App. 2014). Instead, these courts follow the FTC’s test for “unfairness,” which requires the injury to the consumer be (1) substantial; (2) not “outweighed by any countervailing benefits to consumers or competition that the practice produces;” and (3) not reasonably avoidable by the consumer. See id. It is not clear which test Florida courts will apply as some courts still follow the traditional test for unfair practices. See, e.g., RCI TM Corp. v. R&R Venture Grp., LLC, 2015 U.S. Dist. LEXIS 18762, at *12 (M.D. Fla. 2015) (quoting PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So. 2d 773, 777 (Fla. 2003)). Nonetheless, despite this uncertainty, Florida courts and the Legislature have provided some helpful guidance as to which acts are deemed “unfair practices.”
The Florida Legislature has codified certain acts that constitute “unfair practices.” For example, section 540.01, Florida Statutes, list several acts that constitute unfair practices, such as refusals to deal, unconscionable sales at unreasonably high prices, and illegal discounts. See Fla. Stat. § 540.01(1) (2016). Additionally, Section 501.203, Florida Statutes, explicitly states that it is an unfair practice to violate any of the rules promulgated by the FTC, such as “Trade Regulation Rules.” See Fla. Stat. § 501.203(3)(a) (2016). The FTC’s Trade Regulation Rules address a variety of consumer and business transactions, such as used automobile sales, optometrists’ practices, consumer credit, funeral homes, and franchises. See 16 C.F.R. §§ 410.1-460.24 (2016).
Other Unfair Practices
Florida courts have also specifically defined acts that constitute “unfair practices.” For example, trademark infringement has consistently been held to be an unfair practice in violation of FDUTPA. See, e.g., Laboratories Roldan, C. por A. v. Tex Int’l Inc., 902 F. Supp. 1555, 1569-70 (S.D. Fla. 1995). Additionally, adhesion contracts, high-pressure tactics, and taking advantage of a consumer’s inadequate knowledge could constitute unfair practices.
Indeed, the wide array of conduct covered under FDUTPA makes for diverse and interesting cases. In State v. Beach Blvd the plaintiff successfully brought a FDUTPA claim for the placement of a GPS tracking device without the consent of consumers on vehicles purchased at a car dealership and for practices leading consumers to believe that they would get their deposits back if they did not buy the vehicles. State v. Beach Blvd Automotive, Inc., 139 So. 3d 380, 390 (Fla. 1st DCA 2014).
Additionally, a FDUTPA complaint was recently filed by seven law school graduates in Jacksonville in front of the United States District Court for the Middle District of Florida against Florida Coastal School of Law. The complaint stated that Florida Coastal School of Law publicized deceptive and unfair employment and salary data and sought $100 million dollars in equitable relief. This complaint is a perfect example of the factual boundaries of FDUTPA claims. Florida Coastal allegedly posted that 96.4 % of graduates had obtained employment within nine months of graduation, but it acquired this data through surveys it had sent to its recent graduates. Such data was alleged as not reliable because it was “unaudited, unverified and self-reported.” Doc. 74 ¶ 5, 28.
In 2012, Florida Coastal purportedly changed its website to reflect the new standards in law school job reporting data. Doc. 74 These changes allegedly moved away from aggregate reporting data, and such practices that Florida Coastal had been involved in such as selective surveys from students the law school knew were in well-paying jobs. Doc. 74 ¶ 42-43. Because of these changes, Florida Coastal’s website more accurately reflected the actual employment rates of its graduates and the percentage was significantly lower than the 96.4% Florida Coastal had initially reported. Doc. 74 ¶ 31, 44.
The complaint against Florida Coastal asserted “as part of its fraudulent marketing practices and recruitment program, Florida Coastal engaged in a pattern and practice of knowingly and intentionally making numerous false representations and omissions of material facts, with the intent to deceive and fraudulently induce reliance by Plaintiffs and members of the Class.” Doc. 74 ¶ 58. In analyzing Plaintiff’s FDUTPA claims, the court cited Porsche v. Diamond, as holding that an act or practice is unfair if it causes consumer injury that is (1) substantial, (2) not outweighed by any countervailing benefits to consumers or competition, (3) one that consumers themselves could not have reasonably avoided.” Porsche Cars N. Amer. Inc. v. Diamond, 140 So. 3d 1090, 1096 (Fla. 3d DCA 2014). “An injury is reasonably avoidable if consumers have reason to anticipate the impending harm and the means to avoid it.” Orkin Exterm. Co., Inc. v. FTC, 849 F. 2d 1354, 1365-66 (11th Cir. 1988).
Judge Barksdale held that plaintiffs did not allege a plausible deceptive or unfair act or practice actionable under FDUTPA. Barksdale, relying on the court’s holding in Zlotnick v. Premier Sales, held that “FDUTPA does not require companies to be wholly transparent or prohibit them from publishing facts in the light most conducive to business, as long as the publication is not probably deceptive and likely to cause injury to a reasonably relying customer.” Zlotnick v. Premier Sales Group, Inc., 480 F. Supp. 2d 1281, 1284 (11th Cir. 2007). Barksdale further reasoned that “a person considering law school, while not necessarily sophisticated, is college-educated and may be reasonably expected to perform some due diligence that goes beyond glancing at a for-profit enterprise’s self-serving numbers before plunging into substantial debt.” Casey v. Florida Coastal School of Law, Inc., No.3:14-cv-1229-J-39PDB, 2015 WL 10096084 (M.D. Fla. 2015).
While this case is clearly tailored to a situation involving a for-profit law school and perhaps Judge Barksdale’s reasoning is only applicable in a like-situation, it is interesting that Judge Barksdale placed weight on the actions of the consumers that brought this FDUTPA action rather than the business entity. Barksdale’s reliance on the third element of Porsche v. Diamond can be interpreted to mean that a consumer cannot passively fall into less than outright deceptive marketing tactics. Fla. Stat. § 501.202(2); Porsche Cars N. Amer. Inc. v. Diamond, 140 So. 3d 1090, 1096 (Fla. 3d DCA 2014). This means factual considerations such as sophistication of the parties, the type of transaction, the amount of the transaction and others must be considered when a FDUTPA claim is brought.
The type of conduct in this case, in which a defendant did ostensibly engage in deceptive practices but was found not to be eligible for a claim under FDUTPA provides insight into some of the factual boundaries of FDUTPA. From a business standpoint, limitations on the broad application of FDUTPA would promote a competitive spirit and businesses need to stand out from their competition in order to survive. It seems fair to hold both parties accountable for their behavior, especially in situations when a consumer can take reasonable precautions to protect against unfair and deceptive practices.
However, while there are many acts that could constitute deceptive or unfair practices, it is also important to note the acts that exempt from FDUPTA’s coverage. Specifically, FDUTPA does not apply to “any act or practice required or specifically permitted by federal or state law.” Fla. Stat. § 501.212(1). Nor does FDUTPA apply to “any person or activity regulated under the laws administered by (a) The Office of Insurance Regulation of the Financial Services Commission; (b) Banks and savings and loan associations regulated by federal agencies.” Fla. Stat. § 501.212(4)(a), (b). However, in State v. Beach Blvd, the court held that there are some limitations to this exemption: “where the particular activity under attack is, as here, the alleged misrepresentation that credit will be extended only when certain insurance is also purchased, however, it is not the business of insurance . . . that is the implicated.” State v. Beach Blvd Automotive, Inc., 139 So. 3d 380, 388 (Fla. 1st DCA 2014).
Therefore, though FDUTPA actions involving insurance are not automatically exempted under the Act; a factual determination must first be made about how the alleged insurance was used by the defendant in a FDUTPA claim. In State v. Beach Blvd, appellant’s FDUTPA claim failed because appellants alleged that insurance policies were added to their transactions without their knowledge, which is clearly an insurance matter. State v. Beach Blvd Automotive, Inc., 139 So. 3d 380, 389 (Fla. 1st DCA 2014). Had the insurance been required as a pre-condition on the sale of their vehicles, then perhaps their action could have been brought under FDUTPA.
While FDUTPA was designed to encompass a broad spectrum of deceptive and unfair conduct, not all claims are entitled to relief. FDUTPA claims are fact intensive and the precedent can be “all over the map” at times. The strength of claims should be analyzed on a case by case basis. The next and final article in this series will address how to prove a FDUTPA claim and the remedies that are available to those making a claim under FDUTPA.
By: Charles B. Jimerson, Esq. and Daniel L. Buchholz, JD Candidate