Bar News - December 14, 2012
Business Law & Business Litigation: Making Business Claims under the NH Consumer Protection Act
By: Michael J. Kenison
New Hampshire’s Consumer Protection Act, RSA 358-A, is a potentially powerful tool for business litigators considering claims for wrongful business practices. Given its multiple damages and attorney’s fees remedies, a well-grounded Consumer Protection Act (CPA) claim can change the game.
Despite its title, several courts have interpreted the CPA to apply to business transactions that do not directly affect "consumers" as we commonly think of that term.
Federal courts led the way in interpreting the CPA to apply to business-to-business transactions. The first clear proclamation came from the Court of Appeals for the First Circuit in Eastern Mountain Platform Tennis, Inc. v. The Sherwin Williams Company, which stated that "[t]he Act regulates ‘Business Transactions.’" 40 F.3d 492, 499-500 (1st Cir. 1994).
Eastern Mountain complained that the defendant violated the CPA and common law by recommending a tennis-court-painting system that failed to perform as represented. Affirming the judge’s double damages award based on a jury’s finding that the defendant willfully violated the CPA, the Court of Appeals stated that "[t]he unfair and deceptive practices prohibited by the CPA appear to include transactions between business competitors as well as those involving ultimate consumers." The court reached that result by interpreting the "plain meaning" of the Act’s broad terms, "any person" and "any trade or commerce within the state." Id. at 498 (quoting RSA 358-A:2)(emphasis in original).
The New Hampshire Supreme Court followed suit in 2001, affirming a superior court ruling that a commercial seller of lumber was entitled to recover under the CPA against a developer who deceptively eluded payment for the lumber. Milford Lumber Co., Inc. v. RCB Realty, Inc., 147 NH 15 (2001). Like the Eastern Mountain court, the Supreme Court relied on the CPA’s broad language, "any person" and "any trade or commerce." Noting that the defendants did not simply fail to pay for the lumber, but made intentionally vague representations to procure the lumber and later used those representations to disclaim liability, the majority explained: "It would be harmful for commerce in New Hampshire to allow such unethical and unscrupulous activity to occur. The legislature promulgated the Act to protect citizens engaged in commerce from this type of activity." Id. at 20-21. But, please note the dissent in Milford Lumber, which is soundly reasoned as well.
More recently, in George v. Al Hoyt & Sons, Inc., the court affirmed the CPA’s business-to-business applicability, upholding a jury verdict in favor of a real estate developer against a road construction contractor who promised to put in a bridge and took money for it, but then failed to remit the money to the bridge manufacturer and claimed that the bridge was not the road contractor’s responsibility. 162 N.H. 123 (2011). The court explained: "Thus, by its plain language, the CPA clearly provides a private right of action against business entities. Likewise, nothing in the language of the statute suggests that the legislature intended to preclude ‘experienced’ business entities from the protections afforded by the CPA."
Absent the CPA claim, the plaintiff in that case likely would have been relegated to mere breach of contract remedies, versus the multiple damages and attorney’s fees it was awarded. Of note, the court remanded to the trial court the issue of whether "consequential damages" are recoverable pursuant to RSA 358-A:10, I, which permits recovery "in the amount of actual damages." The author is unaware of a decision on that issue as of publication.
There are 15 enumerated acts declared unlawful under the CPA and numerous other statutes provide that a violation of their provisions also constitutes a violation of the CPA. Much litigation has focused on the "catch-all" provision of the CPA, which provides in relevant part, ‘[s]uch unfair method of competition or unfair or deceptive acts or practices shall include, but is not limited to, the following…" RSA 358-A:2.
The "rascality test," borrowed from Massachusetts, has been applied to determine whether a particular act or practice falls under the CPA’s catch-all. See Barrows v. Boles, 141 N.H. 382 (1996). "The objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble world of commerce." As that test is somewhat illusive, more recently our Supreme Court turned to Webster’s for guidance on what is "deceptive" or "unfair." See Kelton v. Hollis Ranch, LLC, 155 NH 666, 668 (2007). For further guidance, the NH Business Court recently looked to the more descriptive FTC test used in federal court. See Condominium Owners Assoc. v. Bowers Landing of Merrimack, et al., No. 10-C-5003 (Merrimack County Superior Court, March 11, 2011). Whichever test is applied, it appears that judges, not juries, will determine whether the test is met, as the Supreme Court held that there is no right to a jury trial on CPA claims. See Hair Excitement, Inc. v. L’Oreal U.S.A, Inc., 158 NH 363 (2009).
Finally, counsel should be aware of a recent decision from the US District Court for the District of New Hampshire, which granted summary judgment to a defendant in an e-coli case on a CPA claim for want of offending conduct occurring in New Hampshire. "While the CPA defines trade and commerce to include conduct that affects the people of New Hampshire either directly or indirectly, that definition does not eliminate the territoriality requirement of RSA 358-A:2. Even trade or commerce that indirectly affects the people of New Hampshire must still be ‘trade or commerce within this state,’ to be unlawful under the CPA." Precourt v. Fairbank Reconstruction Corp., 2012 WL 707080. Thus, according to Precourt, it is not enough that offending trade or commerce affect a person in this state; the offending act must occur here to be actionable under the CPA.
Michael J. Kenison is a Senior Attorney at McLane, Graf, Raulerson & Middleton, Professional Association, practicing in the firm’s Business Litigation Group.