Skip to main content

Search

Unfair and Deceptive Acts and Practices: 12.5.2.2.1 The Supreme Court’s opinion

The effect of a state restriction on UDAP class actions is more complicated when the action is filed in federal court. Under the Supreme Court’s 2010 decision in Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co.,674 some of these restrictions may not apply when a consumer brings a class action in federal court. This subsection reviews the effect of Shady Grove on class action restrictions found in state UDAP statutes.

Unfair and Deceptive Acts and Practices: 12.5.4.1 Comparison of UDAP and Fraud Class Actions

Before the enactment of UDAP statutes, few common law fraud or deceit cases were brought as class actions. Typically, the class would have to prove for each class member that the elements of common law fraud were met. Thus for each individual class member, the class would have to prove the consumer’s reliance and the consumer’s damage. The class action device was viewed by most courts as too cumbersome since a separate factual “trial” might be necessary for each class member. There are obvious difficulties in getting hundreds of consumers to testify as to their reliance or damage.

Unfair and Deceptive Acts and Practices: 12.5.4.2.1 General

The critical element to establish liability in a UDAP class action is the existence of a common deceptive practice involving each class member. The deception practiced against each class member must not only be sufficiently alike so that there is a community of interest, but also questions common to the class must predominate.708

Unfair and Deceptive Acts and Practices: 12.5.4.2.3 Standardized sales presentations

A pattern or policy of deception may also be shown even if sales are only made orally by different sales representatives. A single type of scheme with substantially similar sales representations is enough to make the action manageable.717 A pattern of deception can be proven if the misleading sales presentations were standard statements pursuant to the company’s sales plan or learned by sales representatives through company training or other sales manuals.718

Unfair and Deceptive Acts and Practices: 12.5.4.2.7 Standardized collection practices

Companies almost always use standard debt-collection procedures for a given class of customers, making class actions particularly appropriate.729 Standard first and second notices may be sent. The same “lawyer’s letter” may be used. Telephone collection activities may follow a standard script. A company may routinely sue all debtors in an inconvenient forum, establishing an unfair or deceptive practice common to the class.730

Unfair and Deceptive Acts and Practices: 12.5.4.2.10 Is the class action superior?

Another requirement of Rule 23(b)(3) is that the class action be superior to other available methods for the fair and efficient adjudication of the controversy.752 The fact that in some states treble damages are available only in individual actions does not defeat this requirement.753 Since the class action mechanism allows small individual claims to be aggregated into a single larger claim, there is greater incentive to prosecute, so class members may be willing to accept the lower recovery.

Unfair and Deceptive Acts and Practices: 12.5.5 Multi-State Class Actions

The starting point for analysis of multi-state class actions is Phillips Petroleum Co. v. Shutts.754 That decision dealt with two issues: (1) whether a state court could constitutionally exercise jurisdiction over non-resident class members who did not have significant contacts with the forum state; and (2) in what circumstances the forum state could apply its law to non-resident class members.

Unfair and Deceptive Acts and Practices: 12.6.1 Advantages of the Injunctive Remedy

One of the potentially most effective UDAP remedies against widespread marketplace misconduct is for a private individual to seek a court-ordered injunction preventing the seller from engaging in specified conduct in the future. A merchant may treat occasional damage awards, even if trebled or increased with punitive damages, as an acceptable cost of doing business, not deterring future misconduct. But a properly framed and monitored injunction can eliminate the seller’s use of the challenged practice against all future customers.