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Iowa Code Ch. 714H The Private Right of Action for Consumer Frauds Act Bill Brauch Special Assistant Attorney General Director- Consumer Protection Division.

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Presentation on theme: "Iowa Code Ch. 714H The Private Right of Action for Consumer Frauds Act Bill Brauch Special Assistant Attorney General Director- Consumer Protection Division."— Presentation transcript:

1 Iowa Code Ch. 714H The Private Right of Action for Consumer Frauds Act Bill Brauch Special Assistant Attorney General Director- Consumer Protection Division Iowa Department of Justice

2 The Cause of Action Section 714H.5. Consumer who “suffers an ascertainable loss of money or property” as a result of a prohibited practice or act may bring an action at law to recover actual damages. If consumer prevails in the claim and is awarded actual damages, the consumer’s attorney must be awarded attorney fees and consumer must be awarded costs.

3 What the Law Covers The advertisement, sale or lease of consumer merchandise or the solicitation of contributions for charitable purposes. Consumer merchandise includes any objects, wares, goods, commodities, intangibles, securities, bonds, debentures, stocks, real estate or services offered for sale or lease, or sold or leased, primarily for personal, family, or household purposes.

4 What the Law Covers – Definitions per 714H.2 “Advertisement” means the attempt by publication, dissemination, solicitation or circulation to induce directly or indirectly any person to enter into any obligation or acquire any title or interest in any merchandise. A “consumer” is a natural person or the person’s legal representative. “Person” is very broadly defined – see section 714.16(1)(j). “Sale” means any sale or offer for sale of consumer merchandise for cash or credit.

5 Prohibited Practices – General Conduct – 714H.3 An act or practice the person knows or reasonably should know is: –An unfair practice; –Deception; –Fraud; –False pretense; –False promise; or, –The misrepresentation, concealment, suppression, or omission of material fact all with the intent that others rely upon any of these.

6 Prohibited Practices – General Conduct – 714H.3 “Deception” means an act or practice that is likely to mislead a substantial number of consumers about a material fact or facts. “Unfair Practice” means an act or practice which causes substantial, unavoidable injury to consumers that is not outweighed by any consumer or competitive benefits which the practice produces.

7 Prohibited Practices – General Conduct – 714H.3 All must be committed in connection with the sale, lease or advertisement of consumer merchandise or the solicitation of contributions for a charitable purpose. All require the party bringing the claim to prove that the prohibited practice related to a material fact or facts.

8 Prohibited Practices – Some Per se Violations – 714H.3 All of the following are violations and none require proving that the person knows or reasonably should know the conduct was deceptive, etc., or proof that the conduct related to a material fact or facts: -- Section 321.69 (Auto Damage Disclosure) -- Chapter 516D (Auto Rental Car Practices) -- Sections 516E.5, 516E.9, 516E.10 (Auto Service Contracts) -- Chapter 555A (Door to Door Sales) -- Section 714.16(2)(k) – (relating to auto repairs) -- Section 714.16(2)(l) – (relating to use of aftermarket parts in auto repairs)

9 Remedies – 714H.5 “Actual damages” means all compensatory damages proximately caused by the prohibited practice or act that are reasonably ascertainable in amount, but does not include damages for bodily injury, pain and suffering, mental distress, or loss of consortium, loss of life, or loss of enjoyment of life.

10 Remedies – 714H.5 Includes discretionary punitive damages awards of up to 3 times actual damages in instances where the defendant’s conduct constitutes willful and wanton disregard for the rights or safety of another. Court may order equitable relief it deems necessary to protect public from further violations, including temporary and permanent injunctive relief.

11 Remedies – 714H.5 Reasonable Attorney Fees –Mandatory to prevailing consumer’s attorney. –Determined by value of time reasonably expended including but not limited to application of 12 listed factors derived from civil rights litigation, and relied on by courts in other states in private consumer fraud actions. (IA is only state with this in statute.)

12 Remedies – 714H.5 Burden of proof = preponderance. Statute of limitations = brought within the latter of two years of the occurrence of the last event giving rise to the cause of action or two years of the discovery of the violation by the person bringing the cause of action. Does not affect claimant’s right to seek relief under any other theory of law.

13 Defenses and Limitations – 714H.5 Law only applies to causes of action accruing on or after the effective date of the Act. Bona fide error defense: no liability if defendant shows by preponderance that violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid the error.

14 Complete Exclusions Solicitations of charitable contributions on behalf of political organizations or religious organizations, as defined in chapter 13C. Solicitations of charitable contributions made on behalf of a state, regionally, or nationally accredited college or university, or on behalf of a nonprofit foundation benefiting such college or University subject to IRS § 509(a)(1) or (3).

15 Complete Exclusions In actions relating to charitable solicitations, unpaid, uncompensated volunteers who receive no monetary gain. Local exchange carrier telephone service. Gas and electric utilities. Cable TV or video service pursuant to a franchise under sections 364.2 or 477A.2

16 Complete Exclusions -- Corporations holding one or more industrial loan or regulated loan licenses employing fewer than 60 full time employees.

17 Exclusions of Professions/Businesses Merchandise offered or sold by any of the following pursuant to a profession or business for which they are licensed or registered, including their business entities, officers, directors, employees or agents: –Insurance companies and agents –Attorneys

18 Exclusions of Professions/Businesses -- Health related professions and facilities, including: hospitals, health care facilities, hospice programs, physicians and surgeons, osteopathic physicians and surgeons, physical therapists, occupational therapists, physician assistants, podiatrists, chiropractors, nurses, dieticians, respiratory care practitioners and therapists, dentists, optometrists, psychologists, pharmacists, social workers and behavioral therapists.

19 Exclusions of Professions/Businesses -- Certain other licensed professionals: –Veterinarians –Public accountants –Engineers –Architects –Landscape architects –Real estate brokers –Funeral directors

20 Exclusions of Professions/Businesses -- Certain financial institutions, including: –Federal and state-chartered banks. –Federal and state-regulated savings and loan associations or savings banks. –Credit unions organized under state or federal law. + Any affiliate or subsidiary of the above Only excluded for acts within the scope of the license!

21 General Exemptions Retailer ads prepared by product suppliers, other than involving health-related claims. The media, regarding advertisements appearing therein or thereon. Advertising that complies with the statutes, rules and regulations of the FTC. Conduct required or permitted by rules of, or statutes administered by, a federal, state or local governmental agency.

22 General Exemptions An affirmative act which violates ch. 714H but is specifically required by other applicable law, to the extent that the actor could not reasonably avoid violating ch. 714H. Exemption from “material fact” for certain repairs to “new merchandise” unless retailer fails to post a sign about disclosing repairs or the consumer asks about them.

23 Class Actions – 714H.7 Must be approved by IA AG before being filed. AG must approve unless AG determines that the lawsuit is frivolous. Does not affect requirements of any other law or of the Iowa Rules of Civil Procedure relating to class action lawsuits.

24 Notification to AG – 714H.6 Applies to all petitions, counterclaims, cross- petitions, or pleadings in intervention alleging a violation. Must send copy of pleading to AG within 7 days of filing and within 7 days of any final judgment in the action send AG copy of that judgment. Party appealing small claims order or judgment to district court involving an issue raised under ch. 714H must notify AG in writing and send copies of pleadings and order or judgment being appealed, all within 7 days of notice of appeal.

25 Notification to AG – 714H.6 Party appealing a district court order or judgment involving an issue raised under ch. 714H must notify AG in writing and send copies of pleadings and order or judgment being appealed, all within 7 days of filing notice of appeal.

26 Notification to AG – 714H.6 All notices and other documents required to be sent to AG must be sent by certified mail unless AG has previously been provided copies of pleadings, orders, judgments or notices in the same action by certified mail, in which case subsequent mailings may be by regular mail. Failure to provide mailings to AG is grounds for subsequent action by AG to vacate or modify the judgment.

27 AG Right to Intervene– 714H.6 AG may intervene as a party at any time or may be heard at any time, upon timely application to court. AG’s decision not to intervene does not preclude AG from bringing a separate enforcement action.

28 Ch. 714H – Statistics (to the best of AG’s knowledge) Number of actions filed: Roughly 80* # on appeal: 1 (Scenic Builders, LLC v. Ron & Julie Peiffer) – decided 5-25-11 # in which AG intervened: 0 # of class actions filed: 6 # cases filed in small claims: 12 # cases in federal court: 2 * We know of 48, but are told there are about 30 others

29 Cases Filed Thus Far (to the best of AG’s knowledge) Ron Dougherty v. Fast Action Auto (Polk County – used auto debt collection and contract issues) Justin & Lindy Fox v. Alan Meyer Enterprises, L.C. (Linn County – alleged misrepresentation of real estate lot size and upgrade costs) Audrey McKnight v. Holmes Hyundai Inc. (Polk County – alleged misrepresentation to auto buyer of right to cancel deal and return vehicle)

30  Erin & Amber Menzer v. Riverside Rentals (Johnson County – Landlord-Tenant issue – unit allegedly uninhabitable due to mold)  Ted Sulgrove v. Stephen Schroeder dba Guaranteed Auto Sales (Polk County – Used car buyer sued defunct dealership and auto bond provider for failure to pay government fees and pay off loan)  Dustin Onstot v. Extreme Auto Plaza, Inc. (Polk County – allegedly unfair debt collection/repo practices)  Harla Jean Peck v. R.S. Auto Incorporated (Jefferson County – alleged used car odometer fraud)

31  Kathy Escher v. Bill LeGrand, Jr. and Better Bodies of Iowa (Johnson County Small Claims – alleged refusal to make refunds for unused personal training)  Scenic Builders, LLC v. Ron & Julie Peiffer (Allamakee County – counterclaim in home construction contract litigation for alleged altering of preliminary estimate and whether, in fact, homeowners contracted with company)  Sean & Julie Beard, Jody Weigel, Michael & Deanna Riley v. Toyota Motor Sales, USA (US Dist. Ct., SDIA, Davenport Div. - Class action lawsuit (1 st under 714H) re unintended acceleration)

32  Donald Peterson, by Susan Peterson-Moulder, his Guardian, v. Cottage Grove Place, Inc. and Life Care Services, LLC (Linn County – Class action lawsuit re “memory care” unit of facility that had no license to offer such)  Residents of Elsie Mason Manor & Ligutti Tower, Katherine Daniel et al v. First Baptist Housing Foundation and American Baptist Homes of The Midwest, dba Elsie Mason Manor & Ligutti Tower (Polk County – Class action lawsuit regarding housing conditions of senior citizen facility – bed bugs)

33  Richard Thomas and Rosalie Thomas, his wife, v. Advanced Bionics (California State Court – LA County – action against manufacturer of cochlear implants with alleged moisture-caused defects)  Jerry Saylor dba Saylor Properties v Frankie Lynn Argenal (Polk County – Counterclaim relating to alleged undisclosed mobile home defects)  Robert W. & Jennifer C. Welsch v. Abby's One True Gift Adoptions (Dallas County – alleged misrepresentations in connection with an adoption that was attempted to be arranged via defendant)

34  Culligan Water Conditioning Ida Grove, IA v. Derek & Kathleen Schroeder (Monona County – counterclaim by consumers alleging various debt collection practices were unfair)  John Kier v. Lake Manawa Nissan, Inc. (Pottawattamie County – alleges deceptive advertising of credit terms by dealer in connection with used car sale)  Nimrod Deering v. Thomas Ballard (Polk County Small Claims – plaintiff homeowner alleges defendant failed to install new windows per contract after taking $2000 down from plaintiff)

35  Professional Solutions Financial Services v. Lifetime Dental and Roberta L. Ekman (Polk County – counterclaim alleges misrepresentation by firm that marketed patient waiting area TV/Computer systems displaying healthcare info via lease agreements – to be offset by payments to plaintiff that didn’t materialize)  Brandon Simpson v. Thomas Moberg (Polk County Small Claims – alleged deception in Craigslist ad for swimming pool filter system – delivered different model than one advertised as sold for $800-1500 – different system sold to plaintiff for $400 goes for $129 - $212)

36  Laura Lake v. Sinclair Oil Corp. (Woodbury County Small Claims -- $4400 sought for alleged placement by defendant in water in gasoline sold at retail)  John Robert Randall v. Heather Woodhouse (Linn County – Counterclaim – IA Legal Aid – LL-T claim alleging nondisclosure and unfair practices re bad housing conditions)  James & Diane Jessen v. Anthony Althiser (Crawford County – alleging home improvement contractor took $14000, did no work, and didn’t return)  Brittney Ketelsen v. Jason Delaney, Delaney’s Auto Center and Repair (Dubuque County, alleges charging for unapproved & unnecessary auto repairs)

37  Russell Trimble v. Phil Marshall (Iowa County – alleged charges for work not done, or done quite poorly, on plaintiff’s cabin)  Peggie Prentice v. South End Used Cars (Fayette County – alleged deceptive used car sales practices)  Cassandra Cory v. Dubuque Extended Stay Hotel (Dubuque County – hotel bedbugs)  William Burt v. Oakview Terrace, L.P. & Conlin Properties, Inc. ( Polk County, rental housing bedbugs)

38  Kelil Haun, et al., v. Perry Comeau, et al., (Fayette County Class Action – alleges pain clinic patients incurred harmful, unnecessary treatment by registered nurses not acting under physician supervision)  Maureen Rogers v. Flobridge Group, LLC, dba Flowbridge.com & Mainstreamloansonline.com (Polk County – alleges unfair debt collection practices in connection with Internet payday loans)  Mae Bryant v. King’s Kars (Linn County Small Claims – alleges unfair used car sale practices)  Margaret Marsh v. Budget Auto Sales, Inc. (Pottawattamie County Small Claims -- alleges unfair repossession practices)

39  Alejandro Rodriguez v. American Home Improvements (Cerro Gordo Small Claims – alleges misreps in connection with home improvements)  Guy Blume v. American Dairy Queen (US District Court for SD of Iowa – alleges deceptive and unfair franchisor practices)  Dogwood Automobiles, et al., v. Healey Werks, LLC and Craig Hillinger, and Shari Hillinger (Woodbury County – alleges misreps in connection with restorations of Ferraris)  Debra Miller & Roy Miles v. Fisbeck Enterprises, LLC (Pottawattamie County – alleges misreps of corp. affiliation in sale of home construction services)

40  Leon Stitts v. Shane Flaherty and Ashley Flaherty (Cerro Gordo County Small Claims – alleged Landlord- Tenant violations) Butts, Trevino, Ramsey, Williams, et al., v. Iowa Health System & Central Iowa Hospital Corp. (Polk County Class Action – alleged unfair practices for charging cash-paying patients higher prices than those covered by insurance or government benefits) Grief v. Custom Crafted Homes (Jones County District Court – alleged false statements by contractor about having paid subcontractors)

41  Keller v. American Laser Centers (Blackhawk County – alleged unfair practices re hair removal services)  McClarin v. Autodrive, Inc. (Webster County – small claims – allegations unknown – appears to be a used car sale case)  Betty Hoenighausen vs North Linn Ford, Inc. d/b/a Junge Center Point (Linn County – demonstrator car allegedly sold as new)  Vida E. Langguth, Kathy Lee Sankey & Jon Dale Kouba, as co-trustees of the Vida E. Langguth Trust, vs Thomas A. Oberbroeckling (Linn County – alleged fraud relating to financial advice)

42  Thomas K. & Jeanne M. Wagner vs Horizon Custom Builders (Polk County – alleged faulty home construction)  Larry Brown vs Steven L. Nelson (Polk County – alleged non-disclosure of defects in sale of home)  Queck Properties vs Corine Mihalakis (Dubuque County – Small claims – allegations unknown to AGO)  Gansen Yard Design d/b/a James P. Gansen vs Jacqueline L. Herrig (Dubuque County – Small Claims – Home improvement fraud counterclaim)

43  Todd Crowley & Jennifer Crowley vs Phillip Drish, Tammy Drish, Myron Greiner & Greiner Real Estate and Auction (Keokuk County – alleged misrepresentation of basement and foundation problems in sale of existing home)


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