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Unfair and Deceptive Acts and Practices: 13.3.10 Test Purchases, Visits

An important investigative technique is for an enforcement agency investigator to pose as a consumer and witness the seller’s practices. Common examples are taking a pre-inspected automobile or appliance to a repair shop, or shopping at a supermarket to determine if goods are available and sold at advertised sale prices.

Unfair and Deceptive Acts and Practices: 13.3.11 Access to FTC Investigational Records

The FTC Act specifies the limitations on the Commission’s authority to release investigatory documents to state attorneys general. The FTC Act also sets requirements concerning use of such documents by state attorneys general that contain trade secrets or other confidential information.

Section 6(f) of the FTC Act (15 U.S.C. § 46(f)), as amended, states:

Unfair and Deceptive Acts and Practices: 13.3.12 Respondent’s Discovery of the State’s Case or Policies

Courts consistently hold that investigated companies do not have a right to compel the state to produce the evidence it is accumulating against that company.245 One rationale preventing discovery against an attorney general’s office is that the attorney general is not a party to the action, but the “people” are plaintiffs for whom the attorney general sues in a protective capacity.246 Also, work product for impending litigation from an investigatory file is usually protected from disclosure.

Unfair and Deceptive Acts and Practices: 13.4.1.2 Where UDAP Statute Requires Offer of Voluntary Compliance or Notice

While the state should comply strictly with a statutory notice requirement, if the seller offers an assurance of voluntary compliance that is inadequate, the state can reject the offer and instead bring the enforcement action.264 Moreover, having obtained an assurance of voluntary compliance, the state need not give the defendant further notice when it seeks an injunction against continuing violations of that assurance.265 The Ohio UDAP statute requires that the respondent be given an opportunit

Unfair and Deceptive Acts and Practices: 13.4.2 Reason to Believe That the Act Has Been Violated As Statutory Precondition to Enforcement

Some state UDAP statutes require that the state institute enforcement proceedings only if it has cause to believe that the statute has been violated.275 Where this requirement exists, it is not an essential element of the action that must be proved at trial. Instead, the requirement only forces the state to show the evidence leading it to believe a deceptive practice has occurred if the defendant raises this issue early in the proceedings.276

Unfair and Deceptive Acts and Practices: 13.4.3 Do Preconditions to Private Actions Apply?

Certain UDAP statutes require consumers to suffer actual damage before bringing UDAP actions. This limitation should not apply to an action brought by the state, which need only show that a practice has a capacity or tendency to deceive, not that there is any actual deception.280 Similarly, while Missouri affords a private cause of action only to a person who has made a purchase or lease, the attorney general can bring suit regarding deception that has not yet resulted in a transaction.281

Unfair and Deceptive Acts and Practices: 13.5.1 Standing Issues and Scope of State's Authority; Venue; Arbitration

The attorney general has standing to bring UDAP claims even where the entity that suffered damage would not have the right to sue.289 For example, even though it is a business that is damaged, and under the state UDAP statute only consumers can sue, the state can still bring the action. The Arkansas Attorney General has standing to bring a UDAP action as a means of enforcing state usury laws, even though only a borrower has standing to bring a usury action.290

Unfair and Deceptive Acts and Practices: 13.5.4 Removal to Federal Court

When the state enforcement authority files a UDAP suit in state court against a citizen of another state, some defendants may attempt to remove the case to federal court on the ground that the parties are citizens of different states. But the state itself is the real party in interest in such a suit, even when it is seeking restitution for consumers, and removal is inappropriate since a state is not a citizen.322

Unfair and Deceptive Acts and Practices: 13.5.6 Challenges to Enforcement Agency’s Pre-Trial Publicity

Attorney general press releases announcing the filing of charges have resisted due process challenges.345 The Ninth Circuit rejected a seller’s claim that negative statements made to the press by an investigator in the attorney general’s office caused it injury to a constitutionally protected liberty or property interest. However, after issuing the decision, the Ninth Circuit granted rehearing, and then the matter was settled and the appellant seller withdrew the appeal.346

Unfair and Deceptive Acts and Practices: 13.5.7 The Respondent’s Counter Suit or Calling Attorney General Staff As Witnesses

One unsuccessful attempt to stop an attorney general enforcement action occurred when the respondent claimed it would call the attorney general’s staff as adverse witnesses (because of certain alleged improprieties). The respondent then argued that the state’s Code of Professional Responsibility required that a law office disqualify itself from a case if any attorneys in the office have to testify against the office’s client.

Unfair and Deceptive Acts and Practices: 13.1 Introduction

Every state gives a state agency—usually the attorney general’s office—the authority to enforce the UDAP statute. State agencies have investigatory powers and remedies that go well beyond those available to private litigants. There are also special issues of standing, scope, limitations, and statutory standards when the state, not a private individual, brings a UDAP action. This chapter analyzes these issues.

Unfair and Deceptive Acts and Practices: 13.2.1 Introduction

For the most part, the same standards as to whether a practice is unfair or deceptive apply whether the state or a private individual brings the UDAP claim. These standards are examined in detail in other chapters of this treatise.7 This section considers the few differences that may exist in these standards depending on whether the state or a private individual brings the UDAP action.8

Unfair and Deceptive Acts and Practices: 13.2.3 Special Deception Standards for State Enforcement

State courts follow FTC precedent and hold that actual deception is unnecessary for a UDAP claim; only that a practice has a capacity or is likely to deceive need be shown.31 Most courts find this standard to apply to both private and state actions.32 But even if a court finds that actual deception is necessary to bring a private action,33 the same court is likely to take a different view for a state action.34

Unfair and Deceptive Acts and Practices: 13.2.4 Special Standards for Unfairness, Unconscionability, Unsubstantiated Claims

UDAP decisions do not find that the standard as to whether a practice is unfair or unconscionable differs between private actions and state actions. Consequently, state enforcement agencies are directed to the standards detailed in the appropriate sections of this treatise.42 Nonetheless, a state attorney general’s office may succeed in pursuing a novel unfairness approach that a court would reject if brought by a private litigant.

Unfair and Deceptive Acts and Practices: 13.2.6.1 Overview

State attorneys general have additional UDAP-type enforcement authority because of the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter the Dodd-Frank Act).55 The Act, effective on July 21, 2011,56 creates the Consumer Financial Protection Bureau (CFPB).

Unfair and Deceptive Acts and Practices: 13.5.8 The Respondent’s Claim of a Right to Court-Appointed Counsel

Respondents occasionally claim to have a constitutional right to a court-appointed attorney in a civil UDAP enforcement action brought by the state. But even in a case where an individual was ordered to pay over $4 million in civil UDAP and RICO penalties, courts have found no such right.363 There may be a right to counsel, however, when the state seeks imprisonment of a defendant in a contempt proceeding for violation of an injunction.364

Unfair and Deceptive Acts and Practices: 13.5.9 Special Counsel

Sometimes it is advantageous for the attorney general to arrange for special counsel or special assistant attorneys general to prosecute a civil UDAP case, either because of the need for specialized expertise or because of a lack of staff and other resources.