The Unexplored Territory of Unfairness in Florida’s Deceptive and Unfair Trade Practices Act
I n 1973 Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) (F.S. §501.201 et seq. ) was enacted to give consumers stronger legal protection against commercial wrongdoing.1 I t is patterned after the Federal Trade Commission Act (FTC act) (15 U.S.C. §§45 et seq. ), which provides a right of action only to the FTC.2 L ike its federal counterpart, Florida’s “little FTC act” prohibited unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.3 F DUTPA further provided that in construing those provisions, due consideration and great weight shall be given to the interpretations of the FTC and the federal courts relating to the FTC act.4 I t enables consumers to recover actual damages, permits recovery of reasonable attorneys’ fees and costs by the prevailing party, and also provides for declaratory judgments and injunctive relief.5 I t gives many additional equitable remedies to state enforcement authorities, who may bring suit “on behalf of one or more consumers.”6
FTC administrative and federal appellate decisions have for some time confirmed that a practice may be “unfair” without being “deceptive.”7 T he clarifying and strengthening amendments8 t o FDUTPA made by the legislature in 1993 tied it even more closely to such FTC precedents and rules. However, practices held by Florida courts to be “unfair or deceptive” (or “unfair and deceptive”), and complaint allegations held to state causes of action for such violations, have generally sounded in deception or at least involved a major deceptive component.9 I n only a few cases have courts found FDUTPA violations, or sustained FDUTPA causes of action, based on nondeceptive practices.10 E ven then, the courts have not explained in a comprehensive way how or why such practices are unfair.
Unfairness has thus been an available yet neglected and misunderstood basis for state, individual, and commercial litigation under FDUTPA. This article will explore the elements of proof and remarkably broad scope of the seemingly amorphous “unfair acts or practices” proscription. It also will set out relevant authority to be consulted in evaluating and dealing with unfairness claims. FDUTPA’s current prohibitions on unconscion-able, as well as deceptive, acts or practices will be treated in subsequent articles.
Until 1993, a FDUTPA violation had been a violation of any provision of the act or any rule promulgated by the Department of Legal Affairs (DLA) pursuant to its authority to specify unfair or deceptive acts or practices thereunder.11 The 1993 amendments expanded the definition to make it current with developing FTC jurisprudence,12 so as to provide that a violation may be based on of any of the following:13
1) Any rules promulgated pursuant to the FTC act or FDUTPA;
2) The standards of unfairness or deception set forth and interpreted by the FTC or the federal courts; or
3) Any law, statute, rule, regulation, or ordinance which proscribes unfair methods of competition, or unfair, deceptive, or unconscionable acts or practices.
This expansion was highly significant and timely. Since 1973 the FTC has set forth coherent standards of both unfairness and deception, and promulgated numerous rules proscribing unfair practices on an industry-wide basis. Those FTC rules have effectively become Florida law.
The 1993 amendments marked a substantial change in approach to defining FDUTPA’s substantive scope. Originally, the legislature and courts apparently contemplated that the DLA would specifically identify most unfair or deceptive business practices through administrative rulemaking.14 The amendments’ incorporation of the FTC’s standards and rules, however, combined with the DLA’s subsequent repeal of most of the rules it had previously promulgated under FDUTPA,15 have made such FTC precedent the preeminent determinant of what constitutes “unfair or deceptive acts or practices.”
In 1996, 1997, and 1998 FDUTPA was amended further to make minor language and other modifications not germane to this article.16 The definition of violation was not changed.
Before proceeding further, a brief explanation of the sources of FTC precedent may be useful. FTC adjudicative actions, instituted by a majority vote of the five-member Commission on a standard based upon a “reason to believe” that a violation has been committed and public interest considerations, initially are decided by an administrative law judge. Those decisions can be appealed to the Commission, whose decisions are published in F.T.C. Reports. Decisions of the Commission may be appealed by any respondent to a U.S. circuit court of appeals. The FTC also may bring certain actions for injunctive and other equitable relief in U.S. district court. The FTC since 1975 has had the authority to promulgate trade regulation rules (TRRs) of industry-wide application prohibiting specified unfair or deceptive acts or practices. The procedures for such rulemaking include the right to present and cross-examine witnesses. The validity of a TRR may be appealed to any U.S. circuit court of appeals, within 60 days of issuance, on the grounds that it is not supported by substantial evidence in the rulemaking record as a whole, or that it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The FTC enforces those TRRs in federal district court. The FTC also issues policy statements, guidelines, and other public pronouncements, and promulgates additional rules as authorized by other federal laws.17
FTC’s 1980 Unfairness Policy Statement and 1994 FTC Act Amendment
In examining the three statutory bases for unfair acts or practices, for ease of discussion the second will be treated first. On December 17, 1980, the FTC issued a new policy statement on the scope of its unfairness jurisdiction in the form of a letter to the chair and minority leader of the Senate Committee on Commerce, Science, and Transportation,18 which has oversight responsibility for the FTC. The statement “under[took] a review of the decided cases and rules and. . . synthesized from them the most important principles of general applicability. . . . ” It noted that, as the Supreme Court had observed as early as 1931, the meaning and application of unfairness is arrived at by “the gradual process of judicial inclusion and exclusion,” and is “the result of an evolutionary process.” The statement recounted that in 1964, in the context of a rulemaking proceeding concerning advertising and labeling of cigarettes and smoking health hazards, the FTC had set forth three criteria to be evaluated: 1) whether the practice offends established public policy; 2) whether the practice is immoral, unethical, oppressive, or unscrupulous; and 3) whether the practice causes substantial injury to consumers (or competitors or other business people).
It is in fact this now obsolete formulation of unfairness, quoted in the Seventh Circuit’s 1976 opinion in Spiegel, Inc. v. FTC, 540 F.2d 287, 293 n.8 (7th Cir. 1976), which is the one cited most often by the Florida courts.19 Spiegel held that an Illinois catalogue mail order firm’s practice of bringing collection suits under the state long-arm statute for small amounts, which were economically impractical for the out-of-state purchasers to defend against, was unfair on a due process type of analysis. It is not even clear that Spiegel was ever good precedent under FDUTPA, which has always exempted practices specifically permitted by federal or state law.20
The 1980 statement made clear that “[s]ince , the Commission has continued to refine the standard of unfairness in its cases and rules, and it has now reached a more detailed sense of both the definition and the limits of these criteria.” The statement explained the revised criteria essentially as follows.
Unjustified consumer injury is the most important, and can warrant a finding of unfairness in itself. Such unjustified injury must satisfy three tests. First, it must be substantial. While trivial or speculative harm is insufficient, injury may be substantial if it does a small harm to a large number of people. Substantial injury in most cases involves monetary harm. Emotional or other subjective impact ordinarily will not suffice, although in extreme cases it might. Second, the consumer injury must not be outweighed by offsetting benefits to consumers or competition that the practice produces. Third, the injury must be one that consumers themselves could not reasonably have avoided.
The statement explained that whether the conduct violates public policy was (now) to be considered primarily as providing additional evidence on the degree of consumer injury caused, but that it still could independently support an FTC action in cases in which the policy is thoroughly clear. The statement cited as examples the Spiegel decision, FTC decisions applying the policies of the U.C.C. to require auto manufacturers and distributors to refund to customers surpluses generated by repossessions and sales, and an FTC decision on advertising for a weight loss program using a drug whose advertisement was prohibited by FDA regulations. The statement also explained that public policy sources which affirmatively allow a practice may be evidence that a practice is not injurious in its net effects. Finally, the statement explained that the immoral, unethical, oppressive, or unscrupulous test had proven duplicative, and that it would no longer be a criterion for FTC action.
In 1994 the 1980 statement’s criteria were codified as an amendment to the FTC act,21 with a modification that public policy considerations may not serve as a primary basis for unfairness determinations. That modification is effective for FDUTPA purposes,22 since FDUTPA later was amended with no change to the definition of violation. Also, the statement had noted that an injury may be sufficiently substantial “if it raises a significant risk of concrete harm.” The 1994 FTC act amendment more narrowly provided a practice can meet the test if it causes “or is likely to cause” substantial injury. However, because actual damages are explicitly required for monetary recovery under FDUTPA,23 mere likelihood of causing injury is insufficient to state a FDUTPA claim. It would suffice only in actions for injunctive relief.24
The 1980 statement, in reviewing past decisions and rules, identified certain types of practices which have satisfied the criteria for unfairness. These nonexclusive examples include:
• Coercion of consumers into purchasing unwanted goods or services, such as by dismantling a consumer’s home appliance for inspection and refusing to reassemble it until the consumer agreed to buy services or replacement parts, or using teams of sales people who refused to let the customer leave the room until a contract was signed;
• Failing to generate critical price or performance data, leaving the buyer with insufficient information to make informed comparisons;
• Exerting undue influence over highly susceptible classes of purchasers, such as through marketing efforts directed to those with serious illnesses;
• Consumers who buy defective goods or services on credit being unable to assert against the creditor claims or defenses arising from the transaction.
The statement also observed generally that most FTC unfairness matters are brought to halt some form of seller behavior that unreasonably creates or takes advantage of an obstacle to the free exercise of consumer decisionmaking, and thereby interferes with a well-functioning market. While it also identified practices which create unwarranted health or safety risks25 as unfair, such practices generally would not be actionable under FDUTPA as it specifically exempts claims for personal injury or death.26
Subsequent FTC Case Precedent
An FTC case decided since the issuance of the 1980 statement follows its criteria, but demonstrates that they can be applied to novel fact situations. In Orkin Exterminating Co., 108 F.T.C. 341 (1986), a pest control company unilaterally raised what had been contractually fixed annual renewal fees ranging from $15 to $37 (depending on the contract), for over 200,000 of its continuous protection guarantees, by $25 or 40 percent, whichever was greater. This widespread unilateral breach of contract generated, in a four-year period, over $7 million of additional revenue for Orkin. In 1988 the 11th Circuit, in Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1367 (11th Cir. 1988), cert. denied, 488 U.S. 1041 (1989), upheld the FTC’s administrative finding of unfairness based on satisfaction of the criteria of the 1980 statement. The consumer injury was held substantial, even though the monetary loss to individual consumers might be small on an annual basis. The FTC reasoned that there was no offsetting benefit from the fee hikes as they were not accompanied by an increase in the level or quality of service. Consumers could not reasonably have avoided the harm caused by the increases since the contracts gave no indication that the fees might be raised for any reason; because the consumers could not subsequently mitigate the harm through Orkin’s “accommodation program” rolling back renewal fees, as it was offered only to consumers who complained; and because there was no evidence that other providers of pest control services offered fixed renewal fees. The 11th Circuit cited the 1980 statement and Supreme Court and other judicial precedent as to the FTC’s “evolving use of a consumer unfairness doctrine not moored in the traditional rationales of anticompetitiveness or deception,”27 and held that Orkin’s widespread and systematic albeit nondeceptive contract breaches were an unfair act or practice. The court also pointed out that it had long been established law that proof of a party’s intent has no bearing on whether a practice violates §5 of the FTC act, and that a practice may be found unfair without a showing that the offending party intended to cause consumer injury.28
With respect to the precedential value of the Orkin decision under FDUTPA, it is important to note that a Florida appellate court has already held that Florida’s economic loss rule29 does not prohibit recovery of damages on a FDUTPA claim brought with respect to a transaction based on a written sales contract. In 1997, in Delgado v. J.W. Courtesy Pontiac GMC-Truck, Inc., 693 So. 2d 602 (Fla. 2d DCA 1997), accord Sarkis v. Pafford Oil, 697 So. 2d 524, 528 (Fla. 1st DCA 1997), the Second DCA reasoned that FDUTPA’s express statutory policy of providing consumers a remedy to recover economic damages trumps the judicially created rule.
The other significant FTC unfairness decision since 1980 was FTC v. International Harvester, 104 F.T.C. 949 (1984), a 1984 administrative decision in what was essentially a products liability case. The FTC held that it was unfair for a tractor manufacturer to have failed to disclose to tractor owners a fuel-geysering problem, known to exist for 17 years, which had caused serous burn injuries and deaths to a limited number of owners. In its product liability sense the decision is not binding precedent under FDUTPA because it does not cover personal injury claims. It is nevertheless instructive for its application of the statement’s criteria. For example, the FTC held that in assessing unfairness it conducts a full cost-benefit analysis. In doing so it weighed the injuries against compliance costs to the company for implementing an effective disclosure plan, although it did not quantify every factor in the analysis. The FTC found that certain disclosures made in operator manuals for new tractors only, which warned against removal of the gas cap but did not mention that the risk was a fuel-geysering problem, were insufficient reasonably to enable tractor owners to appreciate and avoid that risk.30
Precedent from Other States
Although the Florida courts and legislature have recognized that court interpretations of other states’ (somewhat varying) little FTC acts can provide guidance in interpreting FDUTPA,31 very few state courts have thus far explicitly applied the standard set forth in the FTC’s 1980 statement. In State v. Orkin Exterminating Co., 528 So. 2d 198 (La. App. 4 Cir. 1988), a Louisiana appellate court essentially followed the FTC’s administrative decision, but most such decisions have found challenged practices not to be unfair. In Legg v. Castruccio, 642 A.2d 906 (Md. App. 1984) (containing an extended discussion of the scope of the FTC unfairness doctrine), a Maryland appellate court held that a landlord’s failure to install a promised second electric meter in a neighboring apartment, resulting in a tenant’s being stuck for the electricity charges for both apartments, did not violate the tenant’s rights under Maryland’s little FTC act. The court, explaining the statement’s criteria at length, reasoned that since the tenant continued to live there for over three years after learning of the utility situation, she could have reasonably avoided the injury by moving elsewhere. In Bangor Publishing Co. v. Union Street Market, 706 A.2d 595 (Me. 1998), the Maine Supreme Court held that the inclusion of a fine-print personal guarantee provision in a commercial advertising contract was not unfair under the little FTC act, as plaintiff could have reasonably avoided the injury by examining the provision during the week he had it in his possession before signing it. In Suminski v. Maine Appliance Warehouse, 602 A.2d 1173, 1175 (Me. 1992), that same court stated in dictum that an appliance retailer’s continued refusal to repair a television set and denial of the existence of the statutory implied warranty of merchantability, when such was its common conduct, could make out an unfair practice. The court held, however, that the defect in question was too minor and late-arising to constitute a breach of that warranty, and reversed the judgment for plaintiff.
Other recent state court cases, which were not explicitly decided under the 1980 statement’s criteria but appear consistent with those criteria, also arguably indicate types of practices which are unfair. In 1991 in Ekl v. Knecht, 585 N.E.2d 156, 163 (Ill. App. 2 Dist. 1991) (cigarette rule test),32 plumbers unblocked a bathtub drain and then charged $480 for it. When the customer protested the fee as excessive, they threatened to undo their work and turn off the water in the house unless she paid, which she did. The Illinois appellate court found the threats deprived the customer of her bargaining power and violated public policy, and held the conduct to violate the little FTC act. In 1992, in Lester v. Resort Camplands International, Inc., 605 A.2d 550, 556 (Conn. App. 1992) (citing cigarette rule test and 1980 statement test), trailer park members by contract could not camp more than 14 consecutive days on the same site, but the owner had orally explained to the two plaintiffs that this meant merely that they had to move within the park. Later, the owner ordered them (and over 100 other members) to leave entirely based on the 14-day rule, but offered a new type of membership, not including that rule, for additional charges and fees. The Connecticut appellate court, citing Orkin, held this unilateral, widespread breach of contract to violate plaintiffs’ little FTC act rights. In Emlee Equipment Leasing Corp. v. Waterbury Transmission, Inc., 595 A.2d 951, 954 (Conn. Super. 1991) (citing cigarette rule test and 1980 statement test), though, a Connecticut trial court dismissed an equipment lessee’s counterclaim, in a collection action, based on the equipment’s defective nature and the lessor’s failure to remedy it. The court held that those contentions, as to a breach of contract in a single transaction between business enterprises (but whose amount is not indicated), were not sufficient to allege an unfair practice.
Violations of FTC Rules
The second source of violations of FDUTPA are rules promulgated pursuant to the FTC Act or FDUTPA. A violation of such a rule is a per se violation of FDUTPA. There are, within 16 CFR ch. 1, subch. D, numerous FTC TRRs prohibiting practices designated as unfair, or unfair or/and deceptive, while appearing not necessarily deceptive. Some of those rules are cited, by way of explanation, in the FTC’s 1980 statement. The FTC’s rule on labeling and advertising of home insulation (16 CFR 460), requiring manufacturers to calculate a standardized “R-value” measuring insulation capability, compels disclosure of performance data which enable consumers to make informed product comparisons. The FTC’s ophthalmic practices rule (16 CFR 456) requires ophthalmologists and optometrists to provide customers copies of their prescriptions, so as to permit them to price-shop among different providers. The FTC’s rule concerning cooling-off period for sales made at homes or at certain other locations (16 CFR 429; right to cancel within three business days) remedies coercive, high-pressure sales tactics. The FTC’s funeral industry practices rule (16 CFR 453), addressed to particularly vulnerable consumers, prohibits practices including failure to provide a written, itemized price list; failure to offer requested price information over the telephone; failure to obtain a family member’s permission for embalming (with exceptions); and requiring a casket for cremation.
The FTC’s rule on preservation of consumers’ claims and defenses (16 CFR 433; the “holder rule”) makes it an unfair practice to take or receive a consumer credit contract not containing a specified notice that any holder is subject to the claims and defenses which the debtor could assert against the seller of the goods or services. The holder rule was designed to abrogate the use of the holder-in-due-course doctrine in consumer credit transactions. (Similarly, the 1993 amendments to FDUTPA removed its exemption for a holder in due course of a negotiable instrument or the transferee of a credit agreement received in good faith without knowledge of a violation of FDUTPA).33 The FTC’s credit practices rule (16 CFR 444) prohibits as unfair practices a variety of creditor remedies which frequently had been included in consumer credit contracts: confessions of judgment; waivers or limitations of exemption from attachment or execution, except as to property subject to a security interest executed in connection with the obligation; assignments of future wages or other earnings, except as authorized by the consumer as a wage deduction payment plan; and taking a nonpossessory security interest in household goods (other than a purchase money security interest). The portions of the rule relating to wage assignments and security interests were upheld by the D.C. Circuit in 1985 in American Financial Services Ass’n v. FTC, 767 F.2d 957 (D.C. Cir. 1985), cert. denied, 475 U.S. 1011 (1986). That decision contains an extensive dissertation of the evolution of the FTC’s unfairness jurisdiction and enforcement, and a thorough and instructive application of the criteria set forth in the FTC’s 1980 statement.34
Other FTC TRRs include the rule on disclosure requirements and prohibitions concerning franchising and business opportunity ventures (16 CFR 436; prohibiting representations to prospective franchisees as to levels of sales, income or profits without possessing and making available substantiating material); the rule on mail or telephone order merchandise (16 CFR 435), and the rule on use of negative option plans by sellers (16 CFR 425). FDUTPA’s terms, rules issued by the FTC pursuant to laws other than the FTC act (found at 16 CFR ch. 1 subch. C (parts 300-311)), as well as FTC industry “guides” (found at 16 CFR ch. 1 subch. B (parts 17-260)), would appear not to provide a basis for FDUTPA violations.
Violations of DLA Rules and Florida Statutes
Rules promulgated by the Florida Department of Legal Affairs also may define per se unfair practices. FDUTPA requires, however, that those rules must not be inconsistent with FTC rules and precedent.35 While the DLA previously had promulgated numerous rules declaring practices in certain businesses to be “unfair or deceptive,”36 the 1993 amendments clarified that the issuance of such rules was permissive rather than mandatory.37 The legislative history38 indicates that change was made in response to a court decision (apparently later reversed in Department of Legal Affairs v. Father & Son Moving & Storage, 643 So. 2d 22, 23 (Fla. 4th DCA 1994), rev. den., 651 So. 2d 1193 (Fla. 1995)), that all “unfair or deceptive acts or practices” must be defined by a specific rule or regulation.
Beginning in 1995, most then existing rules in the Florida Administrative Code were repealed by the DLA, which made clear that such repeal was not intended to restrict the application of FDUTPA in any way.39 Prior court holdings on unfair or deceptive practices as specified in those rules40 thus no longer have any precedential effect, but an unfairness claim could still be built on the activities they addressed if the FTC’s criteria are met. A few such rules remain, however; for example, the rule mandating certain disclosures and confirming the right of cancellation as to contracts for future consumer services to be rendered on a continuing basis.41
Finally, Florida statutes or ordinances may also define per se actionable unfair acts or practices. There are a few such statutes which do not have their own remedy provisions but rather tie into FDUTPA’s remedies: the solicitation of funds statute; the commercial weight loss practices act; the funeral and cemetery services act (including prohibitions on enumerated unfair claim settlement practices); and the motor vehicle licensing statute (engaging in business of sale of motor vehicles without license).42 While statutes regulating the insurance industry have specific provisions defining unfair or deceptive acts or practices, including a list of unfair claim settlement practices,43 FDUTPA specifically exempts any persons or activity regulated under laws administered by the Department of Insurance (or by the Public Service Commission, or banks and savings and loan associations regulated by the Department of Banking and Finance, or federal agencies).44 Nevertheless, such provisions suggest activities which may be unfair under FDUTPA when conducted by other, nonexempt businesses.45
Because FDUTPA’s prohibition is broadly worded and because violations turn in such large part on violation of rules and standards promulgated by a federal agency, the constitutionality concerns expressed in 1976 by the Florida Supreme Court in Department of Legal Affairs v. Rogers, 329 So. 2d 257, 265 (Fla. 1976), accord Father & Son, 643 So. 2d at 25 (but not discussing 1990 amendment deleting “as amended and in effect on April 1, 1983” from §501.204(2), or 1993 amendments), must be considered.46 Rogers held that FDUTPA’s proscription of “unfair or deceptive acts or practices,” although general and flexible in approach, was not unconstitutionally vague or indefinite since it had a meaning that was sufficiently well-established in federal trade (FTC) law.47 In order to prevent an unconstitutional delegation of legislative authority to the FTC, however, Rogers did require that the operative FTC standard, for FDUTPA enforcement and rulemaking purposes, had to be that embodied in FTC and federal court decisions and interpretations rendered prior to the effective date of FDUTPA. As the FTC’s unfairness standard was set forth explicitly prior to the most recent amendments to FDUTPA, it now passes constitutional muster in this respect even more clearly than previously. For as long as that standard remains the same, future FTC and federal court decisions holding practices unfair need not be ignored but rather can serve as further precedential guidance under FDUTPA.
With respect to the FTC rules whose violations constitute per se FDUTPA violations, however, the reasoning of Rogers mandates that such rules be limited to those in effect as of the effective date of the most recent FDUTPA amendment; i.e., October 1, 1998. All FTC TRRs specifically discussed above were in their current form prior to that date. In order for amendments to (or repeal of) FTC TRRs after that date to be effective for FDUPTA purposes, the legislature will have to update FDUPTA periodically.48
Jury Trials; Private Class Actions
FDUTPA contains no reference to a right to jury trial.49 While several decisions reflect that jury verdicts were returned or directed verdicts were reversed on FDUTPA claims,50 the constitutional right to jury trial on a FDUTPA claim has not yet been squarely addressed in reported Florida cases. Other state courts, however, have persuasively held that since little FTC act claims are not derived from the common law and are equitable in nature, jury trials are not available for them.51 Since the Florida Constitution imposes essentially the same jury trial test,52 the reasoning of those cases suggests that there is no right to a jury trial on a FDUTPA claim.
FDUTPA unfairness claims, in the proper circumstances, would appear to lend themselves particularly well to class action treatment. After all, the FTC’s 1980 statement provides that substantial consumer injury may be made out when a small harm is inflicted on a large number of people. Class actions are a judicially approved method for redressing such harm, which might otherwise leave the injured without an economically practical remedy.53 Recent reported decisions reflect or have upheld the certification of FDUTPA claims for class treatment.54 Although FDUTPA as initially enacted omitted proposed class action provisions,55 the express statutory purpose that it be construed liberally to protect the consuming public and legitimate business enterprises from unfair (and other) acts and practices56 supports the permissibility of class treatment. The Fourth DCA’s interpretation in Delgado that the 1993 amendments strengthened the consumer protection provided by the act further militate in favor of class treatment. Of course, individual unfairness claims are still entirely appropriate under FDUTPA, and “substantial injury” in such actions must be assessed in the context of injury to a single person. Evidence that a business conducts an injurious practice on a widespread basis should not be required in such an action, but, as in Lester, should strengthen a consumer’s showing when the monetary injury suffered is not large.
The 1993 amendments and their legislative history57 clarified that FDUTPA claims may also be brought by business enterprises which are consumers of goods, services, property, or other things of value.58 The express statutory purpose is now “[t]o protect the consuming public and legitimate business enterprises,”59 and the act therefore can be used equally well in commercial litigation. Business plaintiffs’ claims, like those of individual consumers, will most often be successful in situations where the defendant “is using an overabundance of market power, or commercial advantage, in an inequitable manner.”60 Compare Bangor Publishing, 706 A.2d 595. Additionally, the definition of “consumer transaction,” which had referred to “purposes that are primarily for personal, family or household or that relate to a business opportunity. . . in which he has not been previously engaged,” was deleted from the act.61 As recently recognized by the Middle District of Florida in Tampa Bay Storm, Inc. v. Arena Football League, Inc., 1998 U.S. Dist. LEXIS 5211, 1998-1 Trade Cas. (CCH) ¶72,184, 11 Fla. L. Weekly Fed. D673, prior decisions dismissing FDUTPA claims based on that definition are no longer controlling.62 Plaintiffs such as franchisees and distributors now can bring FDUTPA claims regardless of their prior experience in the industry. Also, under the expanded “trade or commerce” definition,63 conduct involved in real estate sales, leases, and rentals (other than exempted practices of licensed salespeople, brokers, and appraisers64) now is covered by FDUTPA.
A mere showing of breach of contract, without proof of the required elements of unjustified consumer injury, will not make out an unfair practice. See Emlee Equipment, 595 A.2d 951. Tampa Bay did hold that a FDUTPA cause of action was stated by allegations that defendant, by dealing with an insider, had withheld best efforts to comply with contract provisions concerning the sales price for a football team. While the court correctly noted FDUTPA’s expanded protection of legitimate businesses, the FTC standard requires more to state an unfairness claim.
Unfair acts or practices now are clearly actionable under FDUTPA even if they have no deceptive component. Individual and commercial plaintiffs who can meet their burden of proof have a powerful weapon to use against a potentially huge range of commercial wrongdoing. At the same time, unmeritorious claims should be discouraged by exposure to prevailing defendants’ reasonable attorneys’ fees and costs, and by the provision permitting the court to require private plaintiffs to post bonds to cover damages which might be incurred by defendants in cases that appear to be frivolous, meritless, or harassing.65 Those same provisions, however, undoubtedly also will instill conservatism in private plaintiffs’ attorneys’ decisions as to whether to target practices which appear covered by the FTC’s current unfairness criteria, but which have not yet been addressed in FTC decisions or rules.
The state, with even more remedial tools under FDUTPA but a much lesser exposure to prevailing defendants’ fees and costs,66 has a wide unfairness territory on which to exercise its enforcement authority.
1 For a general discussion of the background of FDUTPA as initially enacted, and its legislative history, see R. Tennyson, The Deceptive and Unfair Trade Practices Act: A New Approach to Trade Regulation in Florida, 2 Fla. St. U. L. Rev. 223 (spring 1974). For a discussion of the various states’ adoption of little FTC acts beginning in the 1960s, see Marshall v. Miller, 276 S.E.2d 397, 400 (N.C. 1981).
2 See Holloway v. Bristol-Myers Corp., 485 F.2d 986 (D.C. Cir. 1973); Baum v. Great Western Cities, Inc., 703 F.2d 1197, 1209 (10th Cir. 1983).
3 Fla. Stat. §501.204(1).
4 Fla. Stat. §501.204(2); Rollins, Inc. v. Heller, 454 So. 2d 580, 584 (Fla. 3d D.C.A. 1984), rev. den., 461 So. 2d 414 (Fla. 1985).
5 Fla. Stat. §§501.211, 501.2105(1).
6 Fla. Stat. §501.207.
7 See, e.g., FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244 n.5 (1972); Spiegel, Inc. v. FTC, 540 F.2d 287, 293 n.8 (7th Cir. 1976); Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1367 (11th Cir. 1988), cert. denied, 488 U.S. 1041 (1989).
8 1993 Fla. Laws ch. 38.
9 See, e.g., Deltona Corp. v. Jannotti, 392 So. 2d 976 (Fla. 1st D.C.A. 1981) (affirming final judgment); Urling v. Helms Exterminators, Inc., 468 So. 2d 451 (Fla. 1st D.C.A. 1985) (reversing directed verdict for defendant); Day v. Le-Jo Enterprises, Inc., 521 So. 2d 175 (Fla. 3d D.C.A. 1988) (reversing directed verdict); Izadi v. Machado (Gus) Ford, 550 So. 2d 1135 (Fla. 3d D.C.A. 1989) (reversing grant of motion to dismiss); Warren v. Monahan Beaches Jewelry Center, Inc., 548 So. 2d 870 (Fla. 1st D.C.A. 1989) (reversing grant of motion to dismiss); Cummings v. Warren Henry Motors, Inc., 648 So. 2d 1230, 1233 (Fla. 4th D.C.A. 1995) (reversing grant of motion to dismiss); W.S. Badcock Corp. v. Myers, 696 So. 2d 776 (Fla. 1st D.C.A. 1996) (affirming summary judgment); Delgado v. J.W. Courtesy Pontiac GMC-Truck, Inc., 693 So. 2d 602 (Fla. 2d D.C.A. 1997) (reversing judgment on the pleadings); Sarkis v. Pafford Oil, 697 So. 2d 524, 528 (Fla. 1st D.C.A. 1997) (reversing grant of motion to dismiss); Fort Lauderdale Lincoln Mercury v. Corgnati, 715 So. 2d 311, 313 (Fla. 4th D.C.A. 1998) (undisturbed trial court judgment on liability); GMAC v. Laesser, 718 So. 2d 276, 277 (Fla. 4th D.C.A. 1998) (undisturbed jury verdict against codefendant).
10 Rollins, 454 So. 2d 580 (house burglar alarm system which failed to work; affirming judgment as to liability); In re Samuels, 176 B.R. 616, 626 (Bankr. M.D. Fla. 1994) (judgment for plaintiff; nonattorney’s performance of bankruptcy law services was, in addition to being deceptive, the unauthorized practice of law and hence “a per se violation” of FDUTPA); Tampa Bay Storm, Inc. v. Arena Football League, Inc., 1998 U.S. Dist. LEXIS 5211 (M.D. Fla.), 1998-1 Trade Cas. (CCH) ¶72,184, 11 Fla. L. Weekly Fed. D673 (denying in part defendant’s motion for summary judgment; discussed later in text). See also Quick Cash v. State Dept. of Agriculture, 605 So. 2d 898, 101 (Fla. 2d D.C.A. 1992) (in evaluating propriety of injunctive relief, court found that failure of automobile lease agreements to comply with requirements of insurance statute “could render them unfair”); Frank Griffin Volkswagen, Inc. v. Smith, 610 So. 2d 597, 601 (Fla. 1st D.C.A. 1992) (rejecting FDUTPA claim based on auto salesman’s oral statement as to the availability of warranty service and dealer’s subsequent failure to repair auto, apparently because the statement could not as a matter of law create a contractual obligation).
11 Fla. Stat. §501.205 (1).
12 Senate Staff Analysis and Economic Impact Statement, ch. 93-38 (bill no. CS/SB 1066), at 2 (“The new purpose is to make consumer protection and enforcement consistent with federal policy”); Kirby Center v. Dept. of Labor and Employment Security, 650 So. 2d 1060, 1062 (Fla. 1st D.C.A. 1995) (staff analyses indicate legislative intent; Florida statute takes on same construction as federal counterpart on which it is modeled to extent consistent with spirit and policy of Florida law).
13 Fla. Stat. §501.203(3). While the court in Mack v. Bristol-Myers Squibb Co., 673 So. 2d 100, 104 (Fla. 1st D.C.A. 1996), rev. dismissed, 689 So. 2d 1068 (Fla. 1997), stated in dictum that the legislature did not intend this list to be exclusive, it provided no examples of other arguable types of violations.
14 Tennyson, supra note 1, at 225, 246, 253; Department of Legal Affairs v. Rogers, 329 So. 2d 257, 265, 269 (Fla. 1976) (England, J., concurring; “Florida’s declaration of commercial policy. . . may be ‘fleshed out’ by administrative action to meet changing circumstances within our borders”); Fla. Stat. §501.205 (rulemaking).
15 See supra note 39.
16 1997 Fla. Laws chs. 98 and 103, and 1998 Fla. Laws ch. 299 (effective October 1, 1998).
17 See 15 U.S.C. §§21, 45(c), 46, 53(b), 57a(a),(b), (e) (referring to 5 U.S.C. §706), 57b-3; 16 CFR 1.7-.20, 3.11(a), 3.42, 3.54.
18 Reprinted in H.R. Rep. No. 156, Pt. 1, 98th Cong., 1st Sess., 33-47 (1983); Trade Reg. Rep. (CCH) ¶50,421 [1969-1983 Transfer Binder] at 55,946-55 (with Companion Statement); 104 F.T.C. at 1071–76; Averitt, The Meaning of ‘Unfair Acts or Practices’ in Section 5 of the Federal Trade Commission Act”, 70 Geo. L.J. 225, 288 (1981).
19 E.g., Urling, 468 So. 2d 451; Laesser, 718 So. 2d at 277; Delgado, 693 So. 2d at 606; Dept. of Legal Affairs v. Father & Son Moving & Storage, 643 So. 2d 22, 26 (Fla. 4th D.C.A. 1994), rev. denied, 651 So. 2d 1193 (Fla. 1995); Cummings, 648 So. 2d 1230; Suris v. Gilmore Liquidating, Inc., 651 So. 2d 1282, 1283 (Fla. 3d D.C.A. 1995); In re Crown Auto Dealerships, Inc., 187 B.R. 1009, 1018 (Bankr. M.D. Fla. 1995).
20 Fla. Stat. §501.212(1). “Under Illinois law Spiegel’s conduct may have been perfectly proper.” Speigel, 540 F.2d at 291.
21 “The Commission shall have no authority under this section or section 57a of this title to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.” 15 U.S.C. §45(n).
The legislative history indicates that Congress, respecting “sound principles of federalism,” did not intend this amendment to bind states to use this unfairness standard under their little FTC acts. See S. Rep. No. 103-130, U.S. Code Cong. & Admin. News, 103d Cong., 2d Sess. (1994), vol. 4 at 1779, 1787–88. Florida’s Legislature, however, had in the prior year determined on its own to adopt the FTC standard.
22 See Florida Wildlife Federation v. State, 390 So. 2d 64, 67 (Fla. 1980) (in enacting legislation, legislature is presumed to be aware of existing law); further discussion below.
23 Fla. Stat. §501.211(2) (“a loss as a result of a violation”); Rollins, 454 So. 2d 580; Maroone Chevrolet v. Nordstrom, 587 So. 2d 514, 518 (Fla. 4th D.C.A. 1991); S. H. Investment v. Kincaid, 495 So. 2d 768, 770 (Fla. 5th D.C.A. 1986), rev. denied, 504 So. 2d 767 (Fla. 1987).
24 See Kirby Center, 650 So. 2d 1060; Fla. Stat. §§501.207(1)(b), 501.211(1).
25 E.g., distributing free-sample razor blades in such a way that they could come into the hands of small children.
26 Fla. Stat. §501.212(3); T.W.M. v. American Medical Systems, Inc., 886 F. Supp. 842, 844 (N.D. Fla. 1995).
27 Orkin, 849 F.2d at 1363.
28 See also Urling, 468 So. 2d 451. But see Fla. Stat. §501.2075 (civil penalty action by state for willful violation).
29 See Florida Power & Light Co. v. Westinghouse Electric Corp., 510 So. 2d 899 (Fla. 1987); AFM Corp. v. Southern Bell Tel. & Tel. Co., 515 So. 2d 180 (Fla. 1987).
30 In Horizon Corporation, 97 F.T.C. 464, 848 (1981), and Amrep Corporation, 102 F.T.C. 1362, 1668 (1983), aff’d, Amrep Corp. v. FTC, 768 F.2d 1171 (10th Cir. 1985), the FTC held unfair, in applying the three-part test, land sale contract forfeiture clauses allowing the sellers to retain, on the buyer’s default, all payments made by buyer regardless of the magnitude of seller’s resulting damages. However, the contracts were used in the context of a deceptive marketing scheme, and the FTC did not reach the unfairness of such clauses independent of the scheme.
31 See, e.g., Rollins, 454 So. 2d at 585; accord, Urling, 468 So. 2d at 454; H. Rep. Committee on Agriculture and Consumer Services, Final Bill Analysis and Economic Impact Statement, ch. 93-38 (bill no. CS/HB 1753) at 1, 3 (“The bill clarifies the scope of the act, conforming it with the majority of states that have little FTC acts.. . . The bill changes the standard for civil penalties to make it consistent with little FTC acts in most other states and to provide judges with a wealth of case law to interpret the new standard.. . . ”).
32 See also People v. Knecht, 575 N.E.2d 1378 (Ill. App. 2 Dist. 1991).
33 Fla. Stat. §501.212; Senate Staff Analysis, supra note 12, at 3.
34 See also Harry and Bryant Co. v. FTC, 726 F.2d 993 (4th Cir. 1984), upholding the funeral industry practices rule under the 1980 statement criteria.
35 Fla. Stat. §501.205(2).
36 E.g., franchising and distributorships; motor vehicle sales, leasing and repairs; gasoline and fuel sales; rental housing and mobile home parks; mobile home sales and service; sales of real property; home construction and improvement; condominiums and cooperatives; lodging certificate rules; vacation time shares; electronic service, maintenance and repair. See Fla. Admin. Code chs. 2-10—2-28.
37 Fla. Stat. §501.205(1).
38 House Committee Analysis, supra note 31, at 2.
39 See Fla. Admin. Code ch. 2-2 (“Repeal of Rules Regarding Unfair and Deceptive Trade Practices. It is neither possible nor necessary to codify every conceivable deceptive and unfair trade practice prohibited by Part II, Chapter 501, Florida Statutes.. . the repeal by the Department of Legal Affairs of the following rule chapters shall not modify or restrict the application of Part II, Chapter 501, to deceptive and unfair trade practices.. . . ”).
40 Bert Smith Oldsmobile, Inc. v. Franklin, 400 So. 2d 1235 (Fla. 2d D.C.A. 1981) (failure to honor motor vehicle warranties); Claude Nolan Cadillac, Inc. v. Griffin, 610 So. 2d 725 (Fla. 1st D.C.A. 1992) (same); Gardner v. Nimnicht Chevrolet Co., 552 So. 2d 26 (Fla. 1st D.C.A. 1988) (motor vehicle repairs not complying with accepted standards for good and workmanlike repairs); Kingston Square Tenants Ass’n v. Tuskegee Gardens, Ltd., 792 F. Supp. 1566 (S.D. Fla. 1992) (landlord failed to maintain premises in compliance with building, housing and health codes); Anden v. Litinsky, 472 So. 2d 825 (Fla. 4th D.C.A. 1985) (misrepresentations by home contractor).
41 Fla. Admin. Code ch. 2-18.
42 Fla. Stat. §§496.416, 501.057, 320.27(2), and 497.001 et seq., respectively.
43 Fla. Stat. §626.9541(1)(i); see also Fla. Stat. §§636.059, 641.3903.
44 Fla. Stat. §501.212(4).
45 See also Rini v. United Van Lines, Inc., 903 F. Supp. 224, 232 (D. Mass. 1995) (moving company conducted sham claim investigation, including misrepresentations, in violation of little FTC act); Laurents v. Louisiana Mobile Homes, Inc., 689 So. 2d 536, 542 (La. App. 3 Cir. 1997) (defendant, although aware of home’s defects, repeatedly refused to acknowledge them and return consumer’s deposit).
46 See also Cilento v. State, 377 So. 2d 663, 665 (Fla. 1979); State v. Carswell, 557 So. 2d 183 (Fla. 3d D.C.A. 1990).
47 Compare Conner v. Joe Hatton, Inc., 216 So. 2d 209, 213 (Fla. 1968), in which a legislative delegation to the Commissioner of Agriculture to prohibit “unfair trade practices,” without reference to any other standard, was held to be so undefined as to be unconstitutional. The Florida Supreme Court subsequently explained this distinction between Rogers and Conner in D’Alemberte v. Anderson, 349 So. 2d 164, 167 (Fla. 1977) (legislature can bestow requisite precision to a statute through reference to federal law).
48 State v. Rodriguez, 365 So. 2d 157 (Fla. 1978) (legislature can update statutes to deal with such problem). But see Fla. Stat. §220.03 (3), (4) (income tax code, incorporating “[f]uture federal amendments” to federal I.R.C.).
49 Fla. Stat. §501.2091 was apparently entitled “Jury trial” in a nonfinal version of FDUTPA, but changed to “Stay of proceedings pending trial” in the law as codified. See Tennyson, supra note 1, at 228, 255. Also Fla. Stat. §501.207(7) (state actions) refers to evidentiary determinations by “trier of fact,” implying bench trial.
50 E.g., Hauser Motor Co. v. Byrd, 377 So. 2d 773 (Fla. 4th D.C.A. 1979); Deltona, 392 So. 2d 976; Urling, 468 So. 2d 451; Lou Bachrodt Chevrolet v. Savage, 570 So. 2d 306, 308 (Fla. 4th D.C.A. 1990); rev. denied, 581 So. 2d 165 (Fla. 1991); Laesser, 718 So. 2d 276.
51 See Associated Investment Co. v. Williams Associates, 645 A.2d 504, 509 and 512 n.18 (Conn. 1994) (citing Massachusetts and Illinois decisions); Delgado, 693 So. 2d at 606 (emphasizing that FDUTPA is a new, legislatively created cause of action); Rollins, 454 So. 2d at 584; and Urling, 468 So. 2d at 453 (FDUTPA does not require proof of common law fraud). North Carolina courts, taking another tack, construe their little FTC act to require the jury to determine the facts and the trial court to determine whether proven facts constitute an unfair or deceptive act or practice. Hardy v. Toler, 218 S.E.2d 342 (N.C. 1975); accord, Boyd v. Drum, 501 S.E.2d 91 (N.C. App. 1998). The Third DCA took a similar approach in Suris v. Gilmore, 651 So. 2d 1282 (stating legislature’s intent was for court to construe what constitutes unfair or deceptive act, and reversing directed verdict and remanding for jury trial on act’s deceptive nature).
52 In re Forfeiture of 1978 Chevrolet Van, 493 So. 2d 433 (Fla. 1986).
53 Frankel v. City of Miami Beach, 340 So. 2d 463, 466 (Fla. 1976). Cf. LaFerney v. Scott Smith Automobile, 410So. 2d 534, 536 (Fla. 5th D.C.A. 1982) (entitlement to attorneys’ fees helps ensure that small claims will be enforced).
54 W.S. Badcock Corp. v. Myers, 696 So. 2d 776, 780 (Fla. 1st D.C.A. 1996) (misrepresentation); Kingston Square Tenants Ass’n, 792 F. Supp. 1566. See also Mack, 673 So. 2d 100 (unfair methods of competition).
55 Tennyson, supra note 1, at 256.
56 Fla. Stat. §501.202(2).
57 See House Analysis, supra note 31, at 1, 6 (“The changes make it a law that clearly protects both individual and business consumers.. . . Private enterprise will benefit from the clarification.. . . ”).
58 Fla. Stat. §501.203(8).
59 Fla. Stat. §501.202(2).
60 See American Financial Services, 767 F.2d at 981.
61 Fla. Stat. §501.203, former subsection (1); House Analysis, supra note 31, at 3.
62 Black v. Dept. of Legal Affairs, 353 So. 2d 655 (Fla. 2d D.C.A. 1977); Darrell Swanson Consolidated Services v. Davis, 433 So. 2d 651 (Fla. 1st D.C.A. 1983); Heindel v. Southside Chrysler-Plymouth, Inc., 476 So. 2d 266 (Fla. 1st D.C.A. 1985); LJS Co. v. Marks, 480 F. Supp. 241 (S.D. Fla. 1979); Bryant Heating & Air Conditioning v. Carrier Corp., 592 F. Supp. 1045 (S.D. Fla. 1984).
63 Fla. Stat. §501.203(8) (referring to “any property, whether tangible or intangible”).
64 Fla. Stat. §501.212(5).
65 Fla. Stat. §§501.2105(1), 501.211(2),(3); Hamilton v. Palm Chevrolet-Oldsmobile, 366 So. 2d 1233 (Fla. 2d D.C.A. 1979).
66 Based on “a complete absence of a justiciable issue of either law or fact. . . or. . . bad faith. . . . ” Fla. Stat. §501.2105(5).
David J. Federbush is a partner at Williams & Eoannou, P.C., Bethesda, Maryland. He was a litigator in the Federal Trade Commission’s Bureau of Consumer Protection and subsequently had a commercial and plaintiffs’ litigation practice in Miami and the Washington, D.C., area. Mr. Federbush graduated summa cum laude from Yale University in 1971 and received his J.D. in 1976 from Stanford Law School.