45 Unfair Trade Practices Act Violation

• Library: Elements of Civil Causes of Action (SCBar) (2015 Ed.)

45 Unfair Trade Practices Act Violation

A. Definition

The South Carolina Unfair Trade Practices Act (SCUTPA)¹ provides that:

Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.²
Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful [by the Act] may bring an action individually, but not in a representative capacity,³ to recover actual damages.⁴

The Act establishes new substantive rights, making unlawful conduct which was not actionable under common law⁵ by creating "a private right of action for persons damaged by acts or practices declared unlawful by § 39-5-20."⁶ It is limited unfair acts occurring in the conduct of any "trade or commerce"⁷ and to those unfair or deceptive acts or practices that affect the public interest. Thus, "an unfair or deceptive act or practice that affects only the parties to a trade or a commercial transaction is beyond the act's embrace.. .The act is not available to redress a private wrong when the public interest is unaffected."⁸ The South Carolina Unfair Trade Practices Act (SCUTPA) is not limited to instances of consumer protection or antitrust activity.⁹ The South Carolina Unfair Trade Practices Act (SCUTPA) claims may not be maintained in a class action law suit.¹⁰

B. Elements

(1) a violation of the Act
(2) proximate cause
(3) damages¹¹

There is some confusion regarding whether privity is an element of the action. In Reynolds v. Ryland Group, Inc.,¹² the South Carolina Supreme Court considered a certified question from the federal court in which the plaintiffs were subsequent purchasers of homes built by the defendant.

The certified question was:

Under South Carolina law, can Plaintiffs in a residential construction defects case sue Defendant builder, seller and developer under the South Carolina Unfair Trade Practices Act if Plaintiffs did not purchase their residences from Defendant but from the original homeowner more than three years after the initial sale?¹³

The court said there was no specific provision in SCUTPA that limits a cause of action to an immediate purchaser, but answered the certified question in the negative, and observed that subsequent purchasers are not without remedies including actions in tort, negligence, and implied warranties. A dissenting justice said that the majority construed SCUTPA to impose a privity requirement, but that a plain reading of the statute revealed no such requirement and had "... the legislature intended to impose a limitation on the operation of the SCUTPA by imposing a privity requirement, it could easily have done so."¹⁴

A federal court read Reynolds to impose the privity requirement only in the home builder/buyer context, but acknowledged doubt. It also observed that the defendant in the case before it contended Reynolds did not involve privity, but instead the causation element of SCUTPA and simply reiterated that plaintiffs must suffer injury as a result of a SCUTPA violation to recover. In Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc.,¹⁵ the court was again asked to address the privity issue when a federal court inquired if a plaintiff who used but did not purchase a product directly from the defendant and suffered a loss as a result of the defendant's unfair or deceptive acts could obtain relief under the SCUTPA? The court characterized the question as whether a remote purchaser could maintain a SCUTPA action and said that "based on the way this question is posed," the answer was "yes." It noted that Reynolds focused on a subsequent purchaser's ability or options to prove that losses were the result of the original deceptive trade practice and that to hold privity was required before a party could maintain a SCUTPA action would lead to "an absurd result," prohibiting the actions by all remote buyers and competitors, who traditionally have been allowed to proceed under the SCUTPA.

C. Elements Defined

1. A Violation of the Act¹⁶

The act or practice complained of must be unfair or deceptive.¹⁷ It need not be based on a binding contract.¹⁸ Where a contract exists, a mere breach of the contract is not conduct which violates the Act.¹⁹ However, a breach of warranty founded on misrepresentations published to other consumers may constitute a violation.²⁰

Proof of common law fraud is not required to establish a violation.²¹ However, it is essential that the act or practice complained of have an impact on the public interest.²²A complaint need not use the "magic language" adverse impact on the public interest, it is sufficient to allege the conduct is "capable of repetition."²³ The requirement to show impact on the public interest may be met by showing the acts or practices have potential for repetition.²⁴ Potential for repetition may be demonstrated by showing: the same kind of actions occurred in the past,²⁵ thereby making it likely they will continue without deterrence, or the company's procedures create a potential for repetition,²⁶ although the South Carolina Supreme Court has specifically declined to hold these are the only means for showing potential repetition and said each case must be evaluated on its own merits.²⁷

A number of cases have considered whether particular acts or practices affected the public interest. Appealing a variance granted by a Board of Adjustment was found not to constitute an act or practice impacting on the interests of the people of the state.²⁸ Using privileged information concerning a competitor's customers does not inherently involve acts which impact the public interest in a situation where only two direct competitors are involved.²⁹ The failure of a horse seller to deliver registration papers was not conduct readily susceptible to repetition and did not therefore impact on the public interest.³⁰ Padding a bill for termite repair work was found not to affect the public interest where there was no evidence of similar acts to establish or infer the conduct had potential for repetition.³¹Padding automobile repair bills may affect the public interest because of the potential for repetition.³² A warranty by a nursery that it exercised the "greatest care" to keep varieties true to name when breached impacted on the public interest because there was potential for repetition by publication of the misrepresentations to other consumers.³³ Outright deception concerning credit approval and having customers sign both an unconditional sales contract and a conditional bailment agreement are capable of repetition and, thus, have the requisite impact on the public interest and constitute SCUTPA violations.³⁴

Trademark infringement may also violate SCUTPA, and the standard for liability for it, like the federal Lanham Act, is likelihood of consumer confusion.³⁵

There are a number of specific acts declared to be unfair trade practices.³⁶ These include:

• Pyramid clubs and similar operations;³⁷
• Requiring certain insurance coverage;
• Using assumed or fictitious names to misrepresent geographical origin;³⁸
• Deceptive or misleading advertisement of a live musical performance;³⁹
• Attorney advertising in false, deceptive or misleading manner;⁴⁰
• Knowingly and willfully misrepresenting food or a food product if that food or food product purports to be or is represented to be a product of South Carolina but is the product of another state, country, or territory;⁴¹and
• Certain practices by vehicle glass repair businesses concerning insurance claimants;⁴²

There are two statutes that provide certain identified activities are "unlawful and a violation of this article"⁴³ on a declaration of a state of emergency by the Governor:

• Price gouging during an emergency;⁴⁴ and
• Charitable solicitations during emergencies.⁴⁵

Another statute prohibits the resale of certain tickets for more than one dollar above the original price, and it says the proscribed action "violates the South Carolina Unfair Trade Practices Act."⁴⁶ Finally, a statute adopted in 2012 describes certain practices committed by those who sell, repair, or replace vehicle glass as "unlawful," but makes no reference to "trade" and does not use the word "unfair."⁴⁷

2. Proximate Cause

In Wogan v. Kunze,⁴⁸ the court did not specifically mention proximate cause, but effectively addressed the causation element. The plaintiff alleged the defendant physician rendered an "inaccurate, deceptive bill" in violation of SCUTPA for injections of medication he prescribed for her husband. The court noted that under SCUTPA recovery requires the plaintiff to have an "ascertainable loss" of money or property as a result of an unfair or deceptive method, or act. In Wogan there was no evidence in the record that the plaintiff paid the bill. The medical services were rendered to the plaintiff's husband, and she failed to demonstrate an "ascertainable loss" based on the alleged unfair billing. Thus, the trial court was correct to grant summary judgment to the defendant.

In negligence actions, proximate cause is an element of the tort about which the South Carolina Supreme Court has said:

Proximate cause requires proof of: (1) causation in fact and (2) legal cause.
Causation in fact is proved by establishing the injury would not have occurred "but for" the defendant's negligence. [citation omitted] Legal cause is proved by establishing foreseeability. [citation omitted] Although foreseeability of some injury from an act or omission is a prerequisite to establishing proximate cause, the plaintiff need not prove that the actor should have contemplated the particular event which occurred. The defendant may be held liable for anything which appears to have been a natural and probable consequence of his negligence. [citation omitted] A plaintiff therefore proves legal cause by establishing the injury in question occurred as a

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