Navigating Florida's Little FTC Act
By: Douglas B. Brown
03.05.13Florida’s consumer protection legislation was designed to complement the Federal Trade Commission’s (FTC) work by protecting state consumers from deceptive or unfair business transactions. Frequently referenced as the “Florida little-FTC Act” or “FDUTPA,” the law has seen a number of changes over the years, most recently in 2001.
What do businesses need to know about Florida’s little-FTC?
The law poses a significant risk for businesses. Although the damages recoverable under FDUTPA are limited to “actual damages” and “actual damages” has been severely limited by case law, the act still provides for the recovery of attorney fees. Even small damage claims can result in a judgment for thousands of dollars in attorney fees and costs. Not only will the business have to pay its own attorney to defend the claim, but also if they lose, the business will likely pay the majority of the plaintiff’s attorney fees and costs. The total can add up pretty quick.
The problem of being at risk to pay attorney fees if you lose is exacerbated by the fact that what constitutes a violation of FDUTPA has not been clearly defined by the act. A plaintiff can assert that almost any activity is unfair or deceptive and escape early disposition of the case. The term “unfair” is not defined in the act, and some courts have defined it with broad, vague terms, which are truly subjective. Something that might seem entirely fair and above-board to one person may be an egregious act of bad faith to another. We have had some success in a case against the Florida Attorney General to require the Plaintiff to prove actual consumer injury by the Plaintiff that asserts a practice is “unfair.”
Another threat that is emerging now is that plaintiff lawyers are following actions by the FTC under the federal act, and when a company is pursued by the FTC for some activity the FTC alleges is a violation of the federal act, the Plaintiff lawyers are seeking out consumers to be class representatives and filing class action claims based the same activity under the Florida or other state acts. These are so called tag-a-long cases that are often brought in many states by both private Plaintiffs and State Attorney Generals. And since the definitions of “deception” and “unfairness” are so vague, juries are often free to rely on their own personal idea of defining the practice as illegal, rather than applying the facts of a specific case as the Court instructs them on the law. A class action claim based on such vague subjective notions of an unknown jury can be extremely costly to a business.
What types of businesses are at highest risk for claims?
Basically, any business that deals directly with consumers is at risk. And by consumer, we mean anyone who makes a purchase – even when it’s a business-to-business transaction. Suing under the little-FTC is easier than filing a fraud claim and ultimately, the threat of attorney fees can provide significant leverage for settlement by a Plaintiff. The fee award is discretionary and can go both ways, but Defendants can generally satisfy a fee judgment.
Has the increase in Internet sales spawned more cases?
Generally, one distinction with internet sales is that with internet sales, the representations are usually in a printed form on a website or browser advertisement, and as such, are generally not as susceptible to dispute regarding their content, although the interpretation of the representation will almost always be contested. Any statement that is not completely accurate or that could mislead in any way could be the subject of a state unfair or deceptive practice claim. As such, you have to make extremely sure that anything you put on an internet advertisement or website is not susceptible to these types of claims.
How does the work the Federal Trade Commission (FTC) performs on behalf of consumers differ from state consumer protection laws?
The biggest difference is that the FTC operates under an administrative regulatory statute that was never designed to be enforced by individual consumers in a court, before a jury. The Commission is made up of experts, who have extensive legal and business experience and understand the ramifications of decisions under the act. They have a limited budget to enforce the federal act and are selective as to those cases they pursue. When the FTC decides to take on an unfair or deceptive trade case, it does so only after the action’s merits have been considered and approved by the Commission. Individual FTC lawyers cannot bring a case just because they think it is meritorious. They must obtain approval from the agency.
In contrast, state laws, or little-FTCs allow individual consumers to file claims. Juries, made up of people with no previous experience in business operations and with little understanding of the issues, then interpret their analogous state act, usually with little concrete description of what constitutes a violation. They are left to their own subjective feelings about whether an action was a violation.
Essentially, Florida’s little-FTC Act encourages litigation, allowing individuals to file claims based on a loose interpretation unfair or deceptive. Then there’s the problem of tag-along cases. Once the FTC brings a claim against a business, say for false advertising, it is not unusual to see states’ attorneys general file lawsuits on behalf of the citizens in the form of a nation-wide class action.
Can you provide an example of how little-FTC Acts are being applied?
Recently, in a nationwide class action against Porsche, a federal lower court ruled that Porsche’s four-year warranty as it applied to the exhaust system, might be “unconscionable” under some state Little FTC Acts. This was the holding, even though there was no example of any failure before the four-year warranty period expired. How does a court decide that a warranty should be six or eight years, instead of four years? Certainly, consumers can shop for a car with a longer warranty or buy an extended warranty for almost any car they chose. State Little FTC Acts are being applied in ways inconsistent with the FTC’s interpretation of the federal statute, creating uncertainty and a lack of a uniform standard.