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Unfair and Deceptive Acts and Practices: 10.2.1 Introduction

The normal UDAP case seeks to hold the principal—that is, the corporation, employer, or other deep pocket—liable for the acts of those directly dealing with the consumer, such as sales personnel, commissioned salespersons, and other employees. The principal is usually a stable entity easily served with court papers and usually possesses sufficient assets to satisfy a judgment. Requests for injunctions or other nonmonetary relief may only be practical if the principal is joined as a party, and naming the principal may also enhance discovery.

Unfair and Deceptive Acts and Practices: 10.2.3.1 The General Rule That Principals Are Liable

Common law doctrine in most jurisdictions holds principals liable for misrepresentations made by agents who are acting within their actual or apparent authority.30 For torts involving bodily injury, the doctrine of respondeat superior holds masters liable only for the acts of “servants,” that is, for agents whose activity the principal controls.31 But principals are liable for the misrepresentations of all their agents, not just their servants.32

Unfair and Deceptive Acts and Practices: 10.2.3.2 Liability Even Where Agent Acts Without Authority

Courts do not immunize a principal even if the agent lacks actual authority.40 Apparent authority is shown when a reasonable person would suppose the agent has the authority they purport to exercise, and that belief is traceable to the principal’s manifestations.41 Even if there is no apparent authority, some state insurance laws or regulations hold an insurer liable for the acts of insurance agents selling policies for that insurer.42

Unfair and Deceptive Acts and Practices: 10.2.3.3 Are Dealers Agents for the Manufacturer?

An issue of practical import is whether a dealer selling a vehicle or other product is an agent for the product’s manufacturer, making the manufacturer liable for the dealer’s conduct. A consumer who seeks to hold a manufacturer liable for the acts of its dealers should do more than just categorically state that a dealer is an agent of the manufacturer. Specific facts that can establish such an agency should be alleged.45

Unfair and Deceptive Acts and Practices: 10.3.1 Introduction

Principal officers, directors, owners, and/or related companies with assets may be the preferred defendants when the company doing business with the consumer is little more than an empty shell. Even if the company doing business with the consumer is solvent at the initiation of the lawsuit, it may be prudent to join principal officers, owners, or related companies in case the company is later dissolved.

Unfair and Deceptive Acts and Practices: 10.3.6 Liability of Franchisors

Consumers may find franchisees to be insolvent, with the franchisor being the deep pocket. Liability has been asserted where the franchisor failed to terminate a financially troubled franchisee which later went out of business without honoring consumer contracts, particularly where franchisor advertising implied financial solvency of its franchisees.112

Unfair and Deceptive Acts and Practices: 10.4.2.2.1 Conduct sufficient to create liability

To aid and abet a fraud, the assisting party must act knowingly or recklessly in substantially assisting a fraud.141 This assistance can be to further the fraud or to assist in the concealment of the fraud.142 The Kansas Supreme Court identifies the following as the elements of a claim that one party aided and abetted another’s fraud: (1) the party whom the defendant aids must perform a wrongful act causing injury; (2) at the time the defendant provides assistance, they must be generally aware o

Unfair and Deceptive Acts and Practices: 10.4.2.5.2 Affirmative recoveries under the doctrine

While most of the close-connectedness decisions merely allow the consumer to raise defenses, a few decisions have applied the doctrine to hold the creditor liable on the consumer’s affirmative claims arising from the seller’s actions. The rationale of these decisions might enable a consumer to recover damages in excess of the FTC Holder Rule’s cap. For example, in Freeman v.

Unfair and Deceptive Acts and Practices: 10.4.3.1 Introduction

There can be potential UDAP liability not only for parties that aid the seller in advertising, planning, or conducting a deceptive sale, but also for parties that assist the seller in processing the consumer’s payment for the sale. Except in the case of a direct person-to-person cash payment, there will always be intermediaries involved in getting a payment processed from the consumer to the seller.

Unfair and Deceptive Acts and Practices: 5.1 Introduction

The previous two chapters discussed general principles for determining whether a practice is deceptive, unfair, or unconscionable in violation of a UDAP statute. Chapter 3 examined sources of UDAP precedent and developed an analytical framework for showing that a practice is a UDAP violation.

Unfair and Deceptive Acts and Practices: 8.8.5 Environmental Claims for Household Products

The FTC has issued Guides for the Use of Environmental Marketing Claims.758 The guides set out general principles, and have more specific standards about the use of terms such as biodegradable, recyclable, refillable, and ozone friendly.759 In 2012, the FTC expanded the guides to include sections on carbon offsets, certifications and seals of approval, and claims that products are free of certain substances, non-toxic, made with renewable energy, or made with renewable materials.

Unfair and Deceptive Acts and Practices: 8.8.7 Firearms

Massachusetts has adopted a UDAP regulation that prohibits violation of state gun control laws and the sale of handguns manufactured from inferior materials. It also requires tamper-resistant serial numbers, childproofing or safety devices, and safety warnings.797

Unfair and Deceptive Acts and Practices: 8.8.9 Miscellaneous Household Products

The sale of overpriced pots and pans, represented to help prevent heart disease and promote infant health, is a UDAP violation.816 The FTC has settled cases dealing with allegations that a photoprocessing package offered consumers was virtually worthless and an unacceptably bad bargain,817 and that a company misrepresented the performance of athletic shoes.818 Other FTC consent orders deal with misrepresentations dealing with ultrasonic flea collar