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Basis for suit
A consumer may maintain an action under the DTPA whenever the consumer has suffered economic damages or damages for mental anguish produced by any one of the following four types of actions:
1. The use or employment of a false, misleading, or deceptive act or practice that is specifically enumerated in Business and Commerce Code Section 17.46(b) and relied on by the consumer to the consumer's detriment.
2. The breach of an express or implied warranty.
3. An unconscionable action or course of action.
4. The use or employment of an act or practice in violation of Insurance Code Article 21.21.
The DTPA does not necessarily provide all conceivable compensation for actionable conduct, however. Coverage of damages for mental anguish and bodily injury is limited. If the defendant's conduct was committed ``knowingly'', a consumer may recover damages for mental anguish as found by the trier of fact, who may also award three times the amount of ``economic damages''; and if the defendant's conduct was committed ``intentionally'', the consumer may recover damages for mental anguish, and the trier of fact may also award not more than three times the amount of damages for both mental anguish and ``economic damages''. Otherwise, unless another law grants the right to bring a cause of action under the DTPA for other damages, nothing in the DTPA applies to a cause of action for bodily injury or for infliction of mental anguish.
For claims that accrued prior to September 1, 1995, and on which suit has been filed before September 1, 1996, slightly different rules apply. The DTPA violation had only to cause ``actual'' damages under common law damage principles to be actionable. A claim based on violation of Section 17.46(b) did not include a ``reliance'' element. In addition, a claim could be based on a violation of regulations and rules of the Insurance Board, as well as on violations of Insurance Code Article 21.21.
The act on which a DTPA cause of action is based must have some connection with the transaction involved in the case. For example, a plaintiff who bought a house did not have a DTPA cause of action against a previous owner of the house based on alleged misrepresentations made by the previous owner to a previous buyer, because those misrepresentations were not made in connection with the plaintiff's purchase of the house.
A simple breach of contract, without more, does not constitute a ``false, misleading or deceptive act'' in violation of the DTPA. Nor is it an unconscionable act under the DTPA. Similarly, a mere breach of contract will not support a cause of action under the DTPA for violation of Insurance Code Article 21.21. Thus, when the defendant's statements are nothing more that representations that he or she will fulfill a contractual duty, failure to live up to the representations is not actionable under the DTPA.
The mere issuance of a title insurance policy also does not constitute a ``representation'' for DTPA purposes of the status of the property's title. Ordinarily, the issuer's obligation will be only to indemnify for losses caused by defects in the title. Of course, a title insurer may make affirmative representations. The insurer will be held responsible for a representation that is the producing cause of recoverable damages suffered by the insured.
Whether a violation of the DTPA has occurred is not necessarily determined at the time of the sale or other transaction. For example, when a plaintiff purchased an interest in the future embryo transfers of a particular cow that was pregnant at the time of sale, based on the seller's representation that the cow would be ready to produce multiple embryos at a later date, the court held that a deceptive practice occurred at the time the cow was found unable to produce multiple embryos. The fact that the cow's condition at the time of sale was not misrepresented did not preclude findings of DTPA violations based on misrepresentation and unconscionable conduct.
False, Misleading, or Deceptive Business Practices
Laundry List Violations
A plaintiff may assert a DTPA cause of action if the defendant committed one of the false, misleading, or deceptive practices listed in Business and Commerce Code Section 17.46(b) and if the plaintiff relied on that conduct to his or her detriment. The practices listed in Section 17.46(b), sometimes referred to as ``laundry list'' violations, are as follows:
1. Passing off goods or services as those of another.
2. Causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services.
3. Causing confusion or misunderstanding as to affiliation, connection, or association with, or certification by, another.
4. Using deceptive representations or designations of geographic origin in connection with goods or services.
5. Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have, or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have. The objective of subdivisions (5) and (7) is to ensure that descriptions of goods and services offered for sale are accurate, and the subdivisions cover both general and specific descriptions.
6. Representing that deteriorated, reconditioned, reclaimed, used, or secondhand goods are original or new.
7. Falsely representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model. A plaintiff need not prove intent, trickery, artifice, or device to establish this type of violation.
8. Disparaging the goods, services, or business of another by false or misleading representation of facts.
9. Advertising goods or service with intent not to sell them as advertised. The primary purpose of this provision and the one that follows is to prevent bait and switch advertising.
10. Advertising goods or services with intent not to supply a reasonable expectable public demand, unless the advertisements disclose a limitation of quantity.
11. Making false or misleading statements of fact concerning the reasons for, existence of, or amount of price reductions. A supplier's false representation that a dealer is getting the supplier's ``best price'' is an example of a violation of this subdivision.
12. Representing that an agreement confers or involves rights, remedies, or obligations that it does not have or involve, or that are prohibited by law. To be actionable, the misrepresentation must refer to one's rights, remedies, or obligations under the contract itself. This provision also does not cover post-incident denials of liability under a contract. One court has suggested that there are three schools of thought as to what is actionable under Section 17.46(b)(12). Under the first view, the plaintiff has a DTPA cause of action when the defendant makes factual representations that prove to be false, but not when he or she makes interpretative representations. Under the second, only incorrect representations concerning unambiguous provisions are actionable. Under the third, a totality of the circumstances approach is used to determine whether the representations are actionable.
13. Knowingly making false or misleading statements of fact concerning the need for parts, replacement, or repair service.
14. Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a consumer transaction.
15. Basing a charge for the repair of any item in whole or in part on a guaranty or warranty, instead of on the value of the actual repairs made or work to be performed, without separately stating the charges for the work and the warranty or guaranty.
16. Disconnecting, turning back, or resetting the odometer of any motor vehicle so as to reduce the number of miles indicated.
17. Advertising any sale by fraudulently representing that a person is going out of business.
18. Using a chain referral sales plan in connection with the sale of or offer to sell goods, merchandise, or anything of value, that uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods, and in connection with the purchase receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing the seller the names of other prospective buyers, if receipt of the compensation or consideration is contingent on the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods.
19. Representing that a guarantee or warranty confers or involves rights or remedies that it does not have or involve. Nevertheless, nothing in the DTPA expands the implied warranty of merchantability as defined in Sections 2.314-2.318 and Sections 2A.212- 2A.216 of the Business and Commerce Code to involve obligations in excess of those that are appropriate to the goods.
20. Promoting a pyramid promotional scheme. A pyramid promotional scheme means a plan or operation by which a person gives consideration for the opportunity to receive compensation that is derived primarily from a person's introduction of other persons to participate in the plan or operation rather than from the sale of a product by a person introduced into the plan or operation. Promoting a pyramid scheme involves either inducing or attempting to induce one or more other persons to participate in a pyramid promotional scheme, or assisting another person in inducing or attempting to induce one or more other persons to participate in a pyramid promotional scheme, including by providing references.
21. Falsely representing that work or services have been performed on, or parts replaced in, goods.
22. Filing suit founded on a written consumer contract in any county other than that in which the defendant resides at the time the suit is commenced or in which the defendant signed the contract, unless the person filing the suit neither knew nor had reason to know that the county was not a proper venue.
23. Failing to disclose information concerning goods or services that was known at the time of the transaction if the failure to disclose was intended to induce the consumer into a transaction the consumer would not have entered into had the information been disclosed. Both knowledge and intent to deceive must be shown to establish a deceptive trade practice under this provision.
24. Using the term ``corporation'' or ``incorporated,'' or an abbreviation of either of those terms, in the name of a business entity that is not incorporated.
25. Taking advantage of a disaster declared by the Governor by selling or leasing fuel, food, medicine, or another necessity at an exorbitant or excessive price, demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, or another necessity.
The Texas Supreme Court has noted that the listed acts and practices must be broadly interpreted, even though a broad interpretation may result in some overlap.
Knowledge or Intent
Knowledge of falsity or intent to deceive is not explicitly required under most of the subdivisions of Section 17.46(b) of the Business and Commerce Code. Moreover, knowledge or intent may not be read into those subdivisions by the courts. Thus, a defendant may be held liable for a deceptive trade practice described in a subdivision without an explicit requirement of knowledge or intent, even if the defendant did not know that the representations in question were false, or intend to deceive anyone.
The subdivisions that do include an element of knowledge or intent are (9), (10), (13), (17), (22), and (23). For purposes of a cause of action based one of these subdivisions requiring knowledge, knowledge means actual awareness, at the time of the act or practice complained of, of the falsity, deception, or unfairness of the act or practice giving rise to the consumer's claim. Actual awareness may be inferred when objective manifestations indicate that a person acted with actual awareness. Intent means actual awareness of the falsity, deception, or unfairness of the act or practice, or the condition, defect, or failure constituting a breach of warranty giving rise to the consumer's claim, coupled with the specific intent that the consumer act in detrimental reliance on the falsity or deception or in detrimental ignorance of the unfairness. Knowledge or intent must usually be inferred, since they are rarely subject to direct proof. Nevertheless, the plaintiff must show some circumstance or other indirect evidence of knowledge or intent to rebut the presumption of fair and honest dealing.
An unconscionable action or course of action is an act or practice that, to a consumer's detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree. In this context, the term gross is usually given its ordinary meaning of glaringly noticeable, flagrant, complete, and unmitigated.
In addition, at least one court has explained that there must be some element of overreaching or victimizing the unwary in order to create a DTPA claim for unconscionable actions. However, the Texas Supreme Court has held that the defendant need not have intended to take advantage of the consumer or acted with knowledge or conscious indifference in order to be found to have committed an unconscionable act. Unconscionability is defined in terms of the objective result of the transaction, not the intent of the defendant. There is no need to show that the defendant engaged in any specific misrepresentation in order to establish unconscionability.
Unconscionability is usually measured at the time of the transaction. Thus, the seller must take advantage of special skills and training at the time of sale, and the gross disparity in value is measured at that time. Diminution in value caused by later events does not support a claim of unconscionability.
A seller may be guilty of an unconscionable act even if the seller charges the market price for an item if the market price does not reflect the item's true value. Market value is not synonymous with value received. If the actual value received is grossly disparate from the amount paid, the seller who charged market value may still be found to have engaged in an unconscionable act.
An attorney's repeated nonfeasance may constitute unconscionable conduct under the DTPA. In one case, the attorney repeatedly failed to communicate with the client, allowed a matter to be dismissed for want of prosecution, and accepted a fee for filing a new suit, which was never filed. This evidence supported the verdict against the attorney. Furthermore, since a DTPA claim was involved, and not negligence, no expert opinion testimony was required regarding the appropriate standard of care. Another court has applied the DTPA to the professional malpractice of architects. It upheld a jury finding that the defendant partnership engaged in an unconscionable action or course of action in its role as an architect. Similarly, an insurance company's failure to inform its insured that it would indemnify him at trial until after the trial began constituted an unconscionable act. The unnecessary delay was unconscionable because the company knew that it would cause the insured to incur substantial legal fees.
Impossibility of performance does not necessarily preclude unconscionable conduct. For example, if a person promises to do that which he or she knows is impossible, the promise and failure to perform might be unconscionable.
There was an alternate definition of unconscionability available for claims that accrued before September 1, 1995, and on which suit was filed prior to September 1, 1996. In those cases, an unconscionable action or course of action included an act or practice that resulted in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration. For purposes of that definition, the kind of disparity that was actionable until September 1, 1995, was the subject of numerous cases.
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