In several recent decisions, the New Hampshire Supreme Court has dramatically expanded the scope of the New Hampshire Consumer Protection Act, N.H. RSA 358-A, and more clearly defined the elements required to prove a claim under the act. After a flurry of confusing court decisions, the New Hampshire legislature also recently amended the act to clarify precisely which sorts of transactions were intended to be exempt from prosecution. Consumer Protection Act claims can be especially dangerous because the act provides for up to three times the actual damages if the plaintiff can prove that the defendant's conduct was willful, and regardless of the defendant's intent, requires that a successful plaintiff be fully reimbursed by the Defendant for "reasonable" attorney's fees and costs.
What Transactions are Exempt from the Act?
The past several years saw a series of cases struggling with the act's unclear statutory language, and, as a result, expanding the type of transactions exempted from the act. Because the previous language and legal decisions interpreting that language had produced a landscape where all "heavily regulated industries" were claiming exemption from the Act, the New Hampshire Legislature amended the exemptions section of the act to exempt only trade or commerce subject to the jurisdiction of the (1) bank commissioner; (2) the director of securities regulation; (3) the insurance commissioner; (4) the public utilities commission; (5) the financial institutions and insurance regulators of other states; and (6) federal banking or securities regulators who possess the authority to regulate unfair or deceptive trade practices. Publishers, broadcasters, printers and other persons engaged in the dissemination of information or the reproduction of printed or pictorial matter who publish, broadcast, or reproduce material without knowledge of its deceptive character also remain exempt under the revised language. All other "trade or commerce," however, is now specifically subject to the reach of the act, removing an area of major uncertainty previously used by defense lawyers to leverage favorable settlements for clients sued under the act.
What a Plaintiff must prove to prevail under the Act
To prevail on a Consumer Protection Act claim, a plaintiff must prove three things: (1) that the defendant is a "person" (defined by the Act to be an individual or a legal entity like a corporation, LLC, or partnership); (2) that the defendant used an "unfair method of competition" or an "unfair or deceptive act or practice;" and (3) that the unfair act happened "in trade or commerce." The first element, that the defendant is an individual or legal entity is rarely disputed. The third element — that the unfair act occurred "in trade or commerce," simply requires a plaintiff to show that the act in question involved the public advertising, offering for sale, sale or distribution of any "services," "property, tangible or intangible, real, personal or mixed," or "any other article, commodity, or thing of value." Typically, any action undertaken by a person or company while in the ordinary course of the conduct of their business will satisfy this requirement. That leaves only the critical question — and the central question of most Consumer Protection Act cases — of whether the defendant's actions at issue constituted an "unfair method of competition" or an "unfair or deceptive act or practice." For help with that question, we can once again turn to the language of the act for guidance.
"Acts Unlawful"
The New Hampshire Legislature has specifically enumerated fourteen categories of "unlawful" conduct in the statute. They include:
- Passing off goods or services as those of another;
- Causing likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods and services;
- Causing likelihood of confusion or of misunderstanding as to affiliation, connection, or association with, or certification by another;
- Using deceptive representations or designations of geographic origin in connection with goods or services;
- Representing that goods, services, or a person have sponsorships, approvals, characteristics, ingredients, uses, benefits or quantities that they do not have;
- Representing that goods are original or new if they are deteriorated, altered, reconditioned, reclaimed, used or secondhand;
- Representing that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model if they are of another;
- Disparaging the goods, services, or business of another by false or misleading representation of fact;
- Advertising goods or services with the intent not to sell them as advertised;
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Advertising goods or services with the intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity;
- Failing to disclose the legal name, street address, and telephone number of the business;
- Making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions; or
- Conducting or advertising a going out of business sale which lasts more than 60 days, or which otherwise violates the strict statutory requirements governing such sales;
- Selling gift certificates with expiration dates; or
- Pricing goods or services in a way that creates or maintains a monopoly or otherwise harms competition
Pursuant to a New Hampshire Supreme Court decision earlier this term, defendants whose conduct falls within one or more of these legislatively proscribed categories will now be held "strictly liable" for their actions. This decision is a significant development in the interpretation of the act with substantial implications for New Hampshire businesses.
Under this new interpretation of the act, a defendant need not have "intended" to commit an unfair or deceptive act or practice in order to be found liable. Although a plaintiff must still prove that a defendant's violation was willful in order to be awarded double or triple damages, no such showing is required for a plaintiff to be awarded his attorney's fees and the costs of his lawsuit — often the largest monetary risk to a defendant. A plaintiff must merely establish a violation of the act, whether willful or entirely accidental, in order to be awarded the entirety of his "reasonable" attorney's fees and costs incurred during the lawsuit. More importantly, the "reasonableness" of a plaintiff's attorney's fees and costs is not determined by reference to the amount of the plaintiff's underlying damages.
Because the act's purpose is to deter bad business conduct, the New Hampshire Legislature has specifically stated that a prevailing plaintiff's "reasonable" attorney's fee in a Consumer Protection Act case need not be proportionate to the amount of damages sought or awarded. Were it otherwise, violations of the statute resulting in only a few thousand dollars worth of damage would never be litigated — because doing so would not prove cost effective to a plaintiff. As such, the bounds of "reasonableness" are not keyed to the underlying damages suffered by the plaintiff — but are determined according to the length and difficulty of the case, and are at the sole discretion of the trial judge. This can be especially perilous for defendants who stonewall and refuse to settle a plaintiff's 358-A claim because, if the plaintiff ultimately prevails, the months and in some cases, years of litigation can result in a court order requiring the defendant to pay the entirety of the prevailing plaintiff's legal bills — often totaling hundreds of thousands of dollars.
Business-to-Business Transactions Covered by the Act
Although previous court interpretations of the act only permitted suits under the act by individual consumers, that is no longer the case. Following the lead of other states, the New Hampshire Supreme Court recently expanded the scope of the act to include transactions between businesses. As a result, a business injured by the deceptive acts or practices of another business can now bring an action under the act, and take advantage of all of the incentives provided to individual consumers.
The Act's Protections Now Apply Equally to Buyers and Sellers
In perhaps the most remarkable development in Consumer Protection Act jurisprudence since the act was first enacted, the New Hampshire Supreme Court also recently held that the act's significant protections apply to sellers as well as buyers in commercial transactions. In this landmark ruling, premised on the court's earlier expansion of the act to include business-to-business transactions and a plain reading of the statutory language, the court noted that although the title of the Act ("The Consumer Protection Act") suggests that it was intended to protect consumers, the actual language of the act does not foreclose actions by a seller of goods or services against an unfair or deceptive buyer. This new development provides businesses on both sides of a business transaction with a powerful new weapon against unscrupulous conduct.
Conclusion
Consumer Protection Act claims are among the hottest, and most prevalent areas of litigation presently being heard in the New Hampshire courts. With the broad new expansions announced by the New Hampshire Supreme Court in recent days, this trend, and the new breed of high stakes litigation it is fomenting, can only be expected to continue.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
